Read this case study before completing the Opportunity Cost test below.
For centuries, people have used the concept of opportunity costs to establish if it is worthwhile trading or collaborating with each other versus trying to do everything themselves. However, even if you do everything yourself, you essentially trade with yourself and the concept of opportunity costs comes into play.
Let’s take a look at an example.
Job and Worth are hunter-gatherers. In the average 6-day week, Job can gather 10 baskets of nuts and berries for her family, while Worth gathers 6. However, when it comes to hunting Worth is able to bag 6 ducks while Job only manages on average 2 in a week. In 6-day week, Job can then choose (essentially trading with herself) to gather 10 baskets of nuts and berries or bag 2 ducks. Or, if the week is split into 2 lots of 3 days to gather 5 baskets of nuts and berries, and bag 1 duck. Similarly, Worth can gather 6 baskets of nuts and berries or bag 6 ducks, or, split the week and gather 3 baskets of nuts and berries, and bag 3 ducks.