Phil offers to do Don's housework for $20 per week. Don's opportunity cost of doing housework is $30 per week, and Phil's opportunity cost of doing housework is $10 per week.
-According to the information provided, what will be Don's gain in consumer surplus as a result of the proposed transaction?

Question

Quizplus · Accepted Answer

Don's opportunity cost of doing housework is $30 but Phil is offering to do it for $20. This means that Don will save $10 per week which is his gain in consumer surplus. However, he still has to pay Phil $20 for the service. Hence, his overall cost will be reduced by $10 per week. Therefore, option C is the correct answer.

Phil Offers to Do Don's Housework for $20 Per Week