Scenario 12-3
Gary is a senior majoring in computer network development at Smart State University.While he has been attending college,Gary started a computer consulting business to help senior citizens set up their network connections and teach them how to use e-mail.Gary charges $25 per hour for his consulting services.Gary also works 5 hours a week for the Economics Department to maintain that department's Web page.The Economics Department pays Gary $20 per hour.
-Refer to Scenario 12-3.If Gary can work additional hours at either job,what is the opportunity cost if Gary spends one hour reading a novel?
A) $20
B) $25
C) $100
D) $125

Question

Quizplus · Accepted Answer

The opportunity cost is the value of the next best alternative foregone. In this case, Gary has two options for working additional hours, either his computer consulting business or working for the Economics Department. If he spends one hour reading a novel, he is giving up the opportunity to earn money at either of these jobs.

Since Gary charges $25 per hour for his computer consulting services and only earns $20 per hour from the Economics Department, his opportunity cost is the higher amount of $25.
Therefore, the best choice is B.

Scenario 12-3 Gary Is a Senior Majoring in Computer Network Development at Development