Jon is a handyman who does odd jobs such as painting, fixing leaky faucets, installing ceiling fans, and minor electrical work. Jill recently contracted with Jon to paint the outside of her home, and chose a unique color that few persons would consider.
The day before he planned to paint, Jon purchased an initial batch of 20 gallons of the paint. The local hardware store, which mixed the paint to order, charged Jon $325; the store also noted its policy of "no refunds or exchanges on custom colors." Unfortunately, Jon threw his back out that evening. By the time he recovered a month later, Jill had sold her home.
Required:
a. What is Jon's opportunity cost of using the paint for a new job?
b. Suppose Jon decides to throw the paint out because no one else wants the color that Jill had picked out. As a hazardous substance, paint has to be properly disposed. The landfill will charge Jon $40 to dispose of the paint ($2 per can). In light of this new information, what is Jon's opportunity cost of using the paint for a new job?
c. Suppose Jill had paid a nonrefundable advance of $350 to Jon. How, if at all, does this information affect Jon's opportunity cost of using the paint for another job?