Arlene quits her $125,000-a-year job to take care of her ailing parents.What is the opportunity cost of her decision?

Question

Quizplus · Accepted Answer

The opportunity cost is the value of the next best alternative that is forgone as a result of the current decision. In this case, Arlene's next best alternative was to continue working and earning $125,000 a year. Therefore, the opportunity cost of her decision to quit her job is at least $125,000. Option A is incorrect because even though she will no longer be earning a salary, the opportunity cost is still $125,000 as it represents the amount she could have earned if she had continued to work. Option B is not the best choice because the "going rate" for home-care providers is irrelevant to the question as the question is asking about the opportunity cost of Arlene's decision. Option D is incorrect because the value she attributes to the satisfaction she receives from taking care of her parents is a part of her decision-making process, and not the opportunity cost of her decision.

Arlene Quits Her $125,000-A-Year Job to Take Care of Her