Suppose You Are Able to Babysit at $10 Per Hour

Essay

Suppose you are able to babysit at $10 per hour. The only cost to you is the opportunity cost of your time. For the first 2 hours, the opportunity cost of your time is $7 per hour. But after 2 hours, the opportunity cost of your time rises to $13 because of other commitments. Draw the marginal cost to you of babysitting. Draw in the price you receive for babysitting. For how long will you babysit? Calculate your producer surplus.