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Juanita and Gilberto need to decide which one of them will take time off from work to complete the rather urgent task of digging postholes for their new fence. Juanita is pretty good with a post auger; she can dig the holes in 30 minutes. Gilberto is somewhat slow; it takes him 3 hours to dig the holes. Juanita earns $120 per hour as a psychiatrist, while Gilberto earns $25 per hour as a cobbler. Keeping in mind that either Juanita or Gilberto must take time off from work to dig the holes, who has the lower opportunity cost of completing the task?

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Answer: Juanita

Explanation:

Given the following :

Time required for Juanita to complete task = 30 minutes

Time required for Gilberto to complete task = 3 hours

Juanita's earning per hour = $120

Gilberto's earning per hour = $25

Juanita's opportunity cost = $120 × 30 minutes

= $120 × 0.5 = $60

Gilberto's opportunity cost = $25 × 3 hours

= $25 × 3 = $75

Therefore, Juanita has the lower opportunity cost of completing the task.

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