Question

A ticket to Disneyland costs $120 and it takes you 7 hours to go through the whole park. A Disney ticket plus max pass will cost you $200 and it will take you 3 hours to go through the whole park (because you don't have to stand in line as long). Other things constant, what is the minimum value of your time to induce you to buy your Disneyland ticket with the max pass?

		$200
		$80
		$26
		$20

Answer 1

It should be $20 per hour

Opportunity cost of time is the amount of money lost each hour when a person is engaged in some time consuming activity. In this case it is taking 7 hours to go through the whole park under ticket price of 120 dollars and just 3 hours when the ticket price is 200 dollars. Note that if the opportunity cost of time is $20 per hour, then an individual can pay total of $80 to save 4 hours and purchase Disney ticket plus Max pass. If opportunity cost of time is less than this amount, then there is no incentive to purchase the ticket and instead the individual will spend time.