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 an 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 includes the gross income they would have earned had they worked that day. Since they make $20 per hour for an 8-hour day, they lose $160 in gross income. However, since they would have paid 20% in taxes on this income, their net loss (opportunity cost) is 80% of $160, which is $128.

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