Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he has to take time off from work. Yet, Adam still decides to go skiing.
A) He loses a total of $120 per day, so his decision is irrational.
B) Adam is definitely making a decision that is in the social interest.
C) Adam's lost $40 per day in wages is not an opportunity cost and so did not affect his decision.
D) His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his marginal cost.
E) The $80 price of skiing is not an opportunity cost and so did not affect Adam's decision.

Question

Quizplus · Accepted Answer

Adam's decision to go skiing is rational as long as his marginal benefit of spending a day skiing is greater than his marginal cost. While he will lose $120 per day ($80 for skiing and $40 in lost wages), if the enjoyment and other benefits he receives from skiing are worth more than that to him, then the decision is rational. The other options are incorrect: A is incorrect because the decision can be rational even if it involves a cost, and simply looking at the total cost does not tell us whether the decision is rational or not. B is incorrect because we have no information about whether the decision is in the social interest or not. C is incorrect because lost wages are indeed an opportunity cost and should be factored into the decision. E is incorrect because the $80 cost of skiing is an opportunity cost, representing the value of the next best alternative that Adam could have done with his time and money.

Going Skiing Will Cost Adam $80 a Day