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Chapter 2: Q 3 (page 45)

You and a friend decide to spend \(100 each on concert tickets. Each of you alternatively could have spent the \)100 to purchase a textbook, a meal at a highly-rated local restaurant, or several Internet movie downloads. As you are on the way to the concert, your friend tells you that if she had not bought the concert ticket, she would have opted for a restaurant meal, and you reply that you otherwise would have downloaded movies. Identify the relevant opportunity costs for you and your friend for the concert tickets that you purchased. Explain briefly.

Short Answer

Expert verified

The opportunity cost for you is downloading movies and the opportunity cost for your friend is a meal at a restaurant.

Step by step solution

01

Step 1. Opportunity cost.

Opportunity cost is the cost foregone for the alternative choices to satisfy wants.

02

Step 2. The opportunity cost for each person.

The opportunity cost for you is downloading movies and the opportunity cost for your friend is a meal at a restaurant because these are the opportunities that they will miss for purchasing the concert ticket.

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After the concert discussed in Problems, 2-3 is over and you and your friend are traveling home, you discuss how each of you might otherwise have used the four hours devoted to attending the concert. The four hours could have been used to study, watch a sporting event on TV, or get some extra sleep. Your friend decides that if she had not spent four hours attending the concert, she would have chosen to study, and you reply that you otherwise would have watched the televised sporting event. Identify the relevant opportunity costs for you and your friend for allocating your four hours to attending the concert. Explain briefly.
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