A worker making $20 per hour decides to take a day of unpaid leave from work to attend a graduation ceremony. The worker ordinarily works and 8-hour day and is subjected to a total tax rate of 20%.What is the worker's total opportunity cost from the day of unpaid leave?
A) $8.00
B) $128.00
C) $112.00
D) $160.00

Question

Quizplus · Accepted Answer

The worker's total opportunity cost is the amount of money they would have earned if they had worked that day, minus the amount of taxes they would have paid on that income. The worker would have earned $20 per hour for 8 hours, or $160. The worker's total tax rate is 20%, so they would have paid $32 in taxes. Therefore, the worker's total opportunity cost is $160 - $32 = $128.

A Worker Making $20 Per Hour Decides to Take a Day