A company has 10 employees who are paid for a 40 hour work week. For the upcoming week, scheduled production requires 37 hours of work per employee. Which of the following statements is true?

A company has 10 employees who are paid for a 40 hour work week. For the upcoming week, scheduled production requires 37 hours of work per employee. Which of the following statements is true?

• A. The extra 3 hours are unused time with no cost
• B. The wage rate will increase in the next week
• C. The opportunity cost of the extra 3 hours depends upon the best alternative use of the employee's time
• D. The firm should lay off workers

Answer: (C)

Opportunity cost is the value of the next-best use of scarce resources, in this case the workers’ time. With 10 employees paid for 40 hours but only 37 hours needed per person, there are 3 hours per employee of unused capacity. The economic cost of that idle time isn’t fixed; it depends on what else those hours could have been used for—maintenance, training, other projects, or even alternative productive tasks. If there’s a high-value alternative use, the opportunity cost is high; if there isn’t, the opportunity cost is low. That’s why the correct statement emphasizes that the cost of the extra hours hinges on the best alternative use of the employees’ time. The other options don’t fit because idle hours still involve wage costs unless actively reallocated, there’s no basis to expect a wage-rate increase, and layoffs aren’t somehow implied by this task mismatch.

Opportunity cost is the value of the next-best use of scarce resources, in this case the workers’ time. With 10 employees paid for 40 hours but only 37 hours needed per person, there are 3 hours per employee of unused capacity. The economic cost of that idle time isn’t fixed; it depends on what else those hours could have been used for—maintenance, training, other projects, or even alternative productive tasks. If there’s a high-value alternative use, the opportunity cost is high; if there isn’t, the opportunity cost is low. That’s why the correct statement emphasizes that the cost of the extra hours hinges on the best alternative use of the employees’ time. The other options don’t fit because idle hours still involve wage costs unless actively reallocated, there’s no basis to expect a wage-rate increase, and layoffs aren’t somehow implied by this task mismatch.