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Question
Sheena has three options of a job, offering her a salary of INR 20K, INR 25K, and INR 30K respectively. What is her opportunity cost?
Sheena has three options of a job, offering her a salary of INR 20K, INR 25K, and INR 30K respectively. What is her opportunity cost?
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Solution
The correct option is C 25K
As a rational individual, Sheena shall choose the best opportunity, which is a job of INR 30k. The cost of choosing the best opportunity is Sheena’s value in the next best opportunity, which is a job of INR 25k. Opportunity cost is the value of a factor in its next best alternative use. Accordingly, opportunity cost of Sheena is INR 25k.
As a rational individual, Sheena shall choose the best opportunity, which is a job of INR 30k. The cost of choosing the best opportunity is Sheena’s value in the next best opportunity, which is a job of INR 25k. Opportunity cost is the value of a factor in its next best alternative use. Accordingly, opportunity cost of Sheena is INR 25k.
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