Figure 3-25
Chile's Production Possibilities Frontier
Colombia's Production Possibilities Frontier
-Alexis is a lawyer.She bills her clients $100 an hour for her services.She can also mow her lawn in 30 minutes.She can hire someone to mow her lawn who takes an hour.Of the following prices,which is the highest Alexis would pay someone to mow her lawn?
A)$99
B)$49
C)$29
D)Alexis would always mow her own lawn because she can do it faster.

Question

Figure 3-25
Chile's Production Possibilities Frontier
Colombia's Production Possibilities Frontier  
-Alexis is a lawyer.She bills her clients $100 an hour for her services.She can also mow her lawn in 30 minutes.She can hire someone to mow her lawn who takes an hour.Of the following prices,which is the highest Alexis would pay someone to mow her lawn?
A)$99 
B)$49 
C)$29 
D)Alexis would always mow her own lawn because she can do it faster.

Quizplus · Accepted Answer

If Alexis billed her clients for an hour for every $100, it means that her opportunity cost for one hour is $100. Meanwhile, it only takes her 30 minutes to mow her lawn, so her opportunity cost for half an hour is $50.

Hiring someone to mow her lawn for an hour means Alexis loses $100 in income but gains an hour of free time to bill another client for $100. So her net opportunity cost for hiring someone is $0.

Therefore, the maximum amount Alexis would pay someone to mow her lawn for an hour is $50, which eliminates options A and C. Option D is also incorrect because she could hire someone and use that hour to bill a client for $100 instead of mowing her lawn.

Option B ($49) is the best choice because it is the closest to the $50 opportunity cost.

Figure 3-25 Chile's Production Possibilities Frontier