Question

Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce.
Reqired:
What is the total opportunity cost (implicit plus explicit costs) of the day that Farmer Ziva spent in the field planting lettuce?

Answer 1

Answer: $380

Explanation:

Implicit costs are the opportunity costs or rather the benefits foregone by picking the current alternative.

For Ziva this is:

= 25 * 10

= $250 she would have made doing home organization

Explicit cost is the expense incurred:

= $130 worth of seed

Total opportunity cost = 250 + 130

= $380