Question

John gives up a shift at work so he can go to Disney World with a friend. He spends $150 at Disney. He would have earned $80 during the shift at work. John's opportunity cost of going to Disney is $ . Suppose John goes to work instead of going to Disney. At the end of the workday he will have $ . Enter whole numbers, such as 132.

Answer 1

Opportunity Cost = Return of Most Lucrative Option – Return of Chosen Option

However, in the present case John is spending $150 at Disney World instead of going to work where he would have earned $80. So, John’s opportunity cost of going to the Disney World is $80, which he could have earned.

Similarly, if John goes to work instead of going to Disney World, at the end of the day he will have $230 which includes $80 for the work and the $150 that he would have otherwise spent at the Disney World.