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

Answer:

The correct answer to the following question is $30 .

Explanation:

Opportunity cost can be described as the benefits that a person ( who can be an investor or individual or even a company  ) is missing out on , if he or she chooses one alternative over the other. This cost is not shown in financial statements but it is important for a owner or manager to understand what potential opportunity he or she is missing out on if chooses one over the other.

In the given question Abby chooses to work for Lewis who are giving her $40 to watch their toddler, so here the next best alternative that she is missing on is $30 that Gilbert's would have given her.