Question

Abby received requests from three families to babysit a toddler for four hours on friday night. she can only babysit for one of the three families. the fleming family offered her $20, the gilbert family offered her $30, and the lewis family offered her $40. if abby chooses to babysit for the lewis family her opportunity cost of this decision is:

Answer 1

In this case the opportunity cost is $30. Opportunity cost is the cost of forgoing the best available alternative for making a particular choice. In this case, the best alternative to Lewis family gift is the gift offered by Gilbert family and hence the opportunity cost is $30 which is the price of the gift offered by Gilbert.