Question

2. Suppose at Friday night, you have two options: (1) go to watch a movie; or (2) work part time at Fred Meyer. The movie ticket costs $20. If you work part time that night, you can earn $60.

(a) Is the cost of the ticket implicit cost or explicit cost of watching the move?

(b) How much is the opportunity cost of going to the movie?

(c) Can you calculate the opportunity cost of working part-time at that night? Explain.

(d) Suppose your mom told you that if you will stay at home that Friday night, you will receive $40. Calculate the opportunity cost if you go to watch the movie.

Answer 1

a) the cost of ticket is explicit cost because it is the direct cost involved opportunity cost

b) opportunity cost of going to the movie is salary lost if you work part time which is $60 and therefore the opportunity cost $60

(c) it is not possible to calculate the opportunity cost of doing part 10 in monetary terms but rather the opportunity cost is the utility sacrificed by not going to the movie

(d) still the opportunity cost is the cost of next best alternative and it is is the salary sacrifice by not doing part time because it is $60 but not 40 dollars because $60 is greater than $40 which means the opportunity cost is $60 only