Assume that for Indy,one hour of study time in economics is perfectly substitutable for an hour of study time in calculus.Indy has exams in both subjects tomorrow and he determines that if spends all of his time studying economics,he will receive scores of 96 on his economics exam and 45 on his calculus exam.If he studies only calculus,his econ score will be 81 and his calculus score 90.Based on this information and assuming that Indy has no better alternative use of his time,what is the opportunity cost of improving his econ score by one (1)point?
A) 1 point on his calculus exam.
B) 1/3 point on his calculus exam.
C) 3 points on his calculus exam.
D) The opportunity cost cannot be determined with the information given.

Question

Quizplus · Accepted Answer

Since one hour of study time in economics is perfectly substitutable for an hour of study time in calculus, we can assume that Indy has a total of 2 hours to study. By studying only economics, he will score 96 in economics and 45 in calculus. By studying only calculus, he will score 81 in economics and 90 in calculus. If he devotes one hour to economics and one hour to calculus, he will score 88.5 in economics and 67.5 in calculus [(96+81)/2 = 88.5 and (45+90)/2 = 67.5]. Therefore, the opportunity cost of improving his econ score by one point is the difference between his calculus score when studying only econ and his calculus score when studying both subjects, which is 90 - 67.5 = 22.5. Since he needs to sacrifice 3 points in calculus to improve his econ score by 1 point (22.5/3 = 7.5), the answer is C.

Assume That for Indy,one Hour of Study Time in Economics