Homework Answers
- If manager asked to work four hour extra on friday night but a person is already has the dinner and movie plan with a friend on friday night.
A rational person will choose movie plan over four hour extra work, when the person is getting higher marginal benefit and utility from movie plan as compare to work. While a rational person will choose four hour extra work over movie plan, when the person is getting higher marginal benefit and utility from work as compare to movie plan.
So the correct option is 4th: Person value the extra pay more than the friday night activities.
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- Opportunity cost is value of next best alternative while choosing the best alternative. For example if a person has 3 alternatives: to work for salary of $2000 or $3000 or $5000.
So here a person rationally choose the job with higher income. Person will choose $5000 and the value of next best alternative is $3000. Here the opportunity cost is $3000.
Option 4th: Benefits from the best forgone alternative.
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