Isabella is a student and also works part-time as a waitress earning $10 per hour. Isabella was invited to attend a play on Sunday afternoon. Attending the play will take 2 hours, and a ticket costs $60. If Isabella were to spend the time studying for an exam, she will receive an HD instead of a D. She values a HD over a D at $40. What is Isabella’s opportunity cost (OC) of attending the play? Explain your answer.
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Answer : Isabella's Opportunity cost for attending play would be $120.
If Isabella works then she would earn $20 dollars in 2 hours and would save $60 for ticket. Compromise with study will have add opportunity cost of $40. Hence opportunity cost will be $120. If Isabella do job then she would have opportunity cost of $20 for choosing job over studies. As it would lower down opportunity cost of $40 by earning $20 . Hence if she chooses job over studies then $20 will be opportunity cost.
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