Macroeconomics
Macroeconomics
5th Edition
ISBN: 9781319098759
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
Question
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Chapter 2, Problem 1QFT
To determine

The opportunity cost of a worker wandering across the factory floor in search of tools and parts.

Concept Introduction:

Opportunity Cost: It is the cost of next best alternative that is foregone in order to pursue one course of action. It refers to the benefits which are given up in the process of obtaining some other benefits.

Expert Solution & Answer
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Explanation of Solution

  • In the above case,the time spent in search of tools could have been used by workers to finish their assigned tasks.
  • The B Company used assembly line method of production in which products were moved from one assembly line to other at a steady rate. This eliminated the need of workers to wander and saved time to work.
  • The amount of work left unfinished due to time spent in search of tools is the opportunity cost of roaming around and searching for tools.

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