Answer to Question #58356 in Microeconomics for Rae

Question

Suppose Morgan enjoys hiking, skiing, and solitude. He graduates from University and needs to decide whether to take a job in a large coastal city at a salary of $75,000 per year, or a job in a small Rocky Mountain community at $ 50,000 per year. If the opportunity cost of taking the $50,000 job is the $75,000 job he gives up, would it be rational for him to take the lower paying job? Explain. Hint : You are not expected to make the decision for him, only to evaluate whether or not the decision is a rational one in economic term.

Answer 1

If Morgan needs to decide whether to take a job in a large coastal city at a salary of $75,000 per year, or a job in a small Rocky Mountain community at $ 50,000 per year, we need also consider the fact, that he likes skiing, hiking and solitude, that are more possible in small Rocky Mountain community, than in a large coastal city. That's why we need to consider this implicit costs of living without his hobbies. So, Morgan may choose to live in small community with lower salary and his decision will be rational enough.