## Question

Suppose that you deciding between seeing a move and going to a concert on a particular Saturday evening. You are willing to pay $20 to see the movie and the movie ticket costs $5. You are willing to pay $80 for the concert and the concert ticket costs $50. The opportunity cost of going to the movie is:

a) $5.

b) $30.

c) $35.

d) $65.

## Answer

The opportunity cost of going to the movie is **b) $30**.

Here’s why:

**Opportunity cost:**This refers to the benefit you forego by choosing one option over another. In this case, the two options are going to the movie and going to the concert.**Willingness to pay:**You’re willing to pay $20 for the movie and $80 for the concert.**Ticket cost:**Both the movie and the concert have ticket costs ($5 and $50, respectively).**Calculation:****Movie opportunity cost:**Your maximum willingness to pay for the movie is $20, not just the ticket cost of $5. So, the opportunity cost of going to the movie is $20 – $5 = $15.**Concert opportunity cost:**Similarly, your maximum willingness to pay for the concert is $80, not just the ticket cost of $50. So, the opportunity cost of going to the concert is $80 – $50 = $30.

Therefore, since you forego a greater benefit ($30 for the concert) by choosing to go to the movie (with an opportunity cost of $15), the opportunity cost of going to the movie is **$30**.

So, option b) is the correct answer. The other options are incorrect because:

- a) $5 only represents the ticket cost for the movie, not the total opportunity cost.
- c) $35 doesn’t accurately reflect the benefit forgone by choosing the movie.
- d) $65 overestimates the total opportunity cost of the concert, as it adds the movie ticket cost to the concert opportunity cost.