Marnie McKay, MD, is a psychiatrist who is in heavy demand. Even though she has raised her fees considerably during the past 5 years, Dr. McKay still cannot accommodate all the patients who wish to see her.
McKay has conducted 7 hours of appointments a day, 6 days a week, for 46 weeks a year. Her fee averages $225 per hour.
Her variable costs are negligible and may be ignored for decision purposes. Ignore income taxes.
1. McKay is weary of working a 6-day week. She is considering taking every other Saturday off.
What would be her annual income (a) if she worked every Saturday and (b) if she worked every other Saturday?
2. What would be her opportunity cost for the year of not working every other Saturday?
3. Assume that Dr. McKay has definitely decided to take every other Saturday off. She loves to repair her sports car by doing the work herself. If she works on her car during half a Saturday when she otherwise would not see patients, what is her opportunity cost?