How long will you search for a $50 dollar bill that you lost in your bedroom if the value of your time is $5 per hour? Suppose that you know with certainty that it is lost in your bedroom, that the...

How long will you search for a $50 dollar bill that you lost in your bedroom if the value of your time is $5 per hour? Suppose that you know with certainty that it is lost in your bedroom, that the value of your time remains $5 per hour and that you must look for the money in order to find it. (Micro economics question regarding opportunity cost and marginal cost)

Asked on by khertel

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gsenviro | College Teacher | (Level 1) Educator Emeritus

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Given that the value of lost money is $50 and that value of my time is $5 per hour (and that this value remains fixed); I would search for the lost dollar bill for 50/5 = 10 hours. If I find the money in that time duration, great, else I would have to stop the search for it, since U would be losing money in search for it beyond 10 hours. For every hour spent in search of the $50 dollar bill, I would be losing out $5 as the opportunity cost (revenue lost by making a choice and not picking the next best alternative). Thus, it would become economically non viable choice to continue the search of the lost dollar bill, beyond 10 hours.

Hope this helps.

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