John and Mary work at a bakery. John can decorate either 10 ice-cream cakes or 4 wedding cakes; Mary can decorate either 8 ice-cream cakes or 2 wedding cakes. According to this scenario

Question

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Opportunity cost is the value of the next best alternative that must be given up in order to pursue a certain action. For John, the opportunity cost of decorating 1 ice-cream cake is giving up the ability to decorate 1/4 of a wedding cake (since he can decorate 4 wedding cakes for every 10 ice-cream cakes). Therefore, the opportunity cost of decorating an ice-cream cake for John is 1/4 ÷ 10 = 1/40 of a wedding cake. Simplifying, it is 2/5 of a wedding cake. Therefore, the best choice is decorating the ice-cream cakes for John since it has a lower opportunity cost than decorating the wedding cakes.

John and Mary Work at a Bakery