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29 April, 13:51

Suppose that you could prepare your own tax return in 15 hours, or you could hire a tax specialist to prepare it for you in 2 hours. You value your time at $11.00 an hour. The tax specialist will charge you $55 an hour. The opportunity cost of preparing your own tax return is:

A.$40

B.$55

C. $110

D. $165

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  1. 29 April, 16:29
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    B.$55

    Explanation:

    If you value your time at $11.00 per hour, and use 15 hours of your own time to make a tax return, it means that doing your taxes on your own will cost you a total of:

    $11.00 x 15 = $165

    The opportunity cost of not hiring the tax specialist is equal to this number minus what the specialist would have cost you.

    Cost of tax specialist = $55 x 2 = $110

    Opportunity Cost = $165 - $110

    = $55

    Thus, the answer is B)
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