Question

Dana, who is trained as a yoga instructor, spends 4 hours on Monday baking and packing 10 boxes of cookies. She sells the cookies for $10 per box. Given that she can also teach yoga for $80 per hour, what is her opportunity cost of baking cookies?

Answer 1

$320.

Explanation: Opportunity Cost is an economic term used to describe the benefits foregone in order to satisfy another want. The opportunity cost of Dana is calculated as follows.

The hours spent baking cookies is 4hours, the amount per hour when Dana is working as a Yoga instructor is $80, total amount forgone (Opportunity Cost) of Dana when baking cookies is 4hours*$80=$320.