Question

Miranda is deciding whether to watch a soccer game or a movie. She is willing to pay up to $100 for the soccer ticket, but $20 for the movie. The price of soccer ticket is $60 and that of movie is $15. Miranda’s opportunity cost of the soccer game is equal to $_______.

Please show your work.

Answer 1

Because she is willing to pay $20 for the movie, the utility she gets from the movie is worth $20 and therefore the opportunity cost of soccer game is equal to the Lost utility by not attending the movie which is net benefit lost by not attending movie plus the cost of soccer game she actually bought and that is the reason why

Net Benefit lost by not going to movie = (Willingness to pay- Price)

= $20-$15 = $5

Opportunity cost = Net Benefit + Price of Soccer

Opportunity Cost = $5+$60 = $65

$65 is the answer to this question.