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.

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.

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