Assume your neighbor is a doctor. He complains bitterly about the overtime that he is putting in at the hospital each weekend. While the overtime is not required, he argues that by not taking it he would be sacrificing $1,000 each weekend. If he were to ask for your opinion about what to do, what would you advise him?

 

Rational Choices

            In this situation, the doctor needs to make a rational choice. It is dependent on the available resources to satisfy most effectively his wants. The rational choice compares costs and benefits to maximize net benefit. To make a rational choice, the doctor must analyze the opportunity cost of working. This is the value of the option that the doctor will choose not to take. In other words, it is what he must give up to get free weekends; $1000 each weekend. Determining the opportunity cost is dictated by personal preferences — what a person loves and dislikes, as well as the degree of those feelings (Bade & Parkin, 2017, p. 6). He must compare costs and benefits to maximize net benefits.

            To make a rational choice, the doctor must examine the margin as well as respond to incentives. An incentive is either a reward that stimulates or a punishment that discourages activity. In this case, the doctor must consider the consequences of losing the incentive; $1000 every weekend. The marginal benefits and marginal costs affect the incentives that the doctor will when making the choice ("Individual decision making | Boundless economics," n.d.). Additionally, making choices at the margin would help the doctor compare all the relevant alternatives systematically and incrementally. He must compare the cost of making a single decision concerning an activity (considered as the marginal cost) to the benefit experienced when the single decision is made concerning the activity (considered as the marginal benefit) (Bade & Parkin, 2017, p.7). The benefit of not working overtime during the weekends hence losing $1000 to the cost of losing $1000 by not working overtime. These margins are what advise on decisions and not the overall picture. Therefore, if the marginal benefit exceeds the marginal cost, the rational choice will be not working overtime. If the marginal benefit is less than the marginal cost, however, continuing with overtime is the reasonable choice.