1. You have already purchased (non-refundable and unsellable) tickets to a conce
ID: 1132129 • Letter: 1
Question
1. You have already purchased (non-refundable and unsellable) tickets to a concert on Friday night. A friend also invites you to her birthday party on Friday. While you like your friend, you politely decline because you really want to go to the concert.
a)You learn that your friend is serving flank steak at her party, all-you-can eat and at no charge. Flank steak is your favorite food. Should this affect your decision to go to the concert? Explain by using the term “opportunity cost.”
b)Suppose instead that you notice that the non-refundable concert ticket (that you already purchased) cost you $10; previously you had mistakenly believed the price was $100. Should learning this information affect your decision to go to the concert?
Explanation / Answer
1
a) Yes, this should affect the decision to go to the concert.
Opportunity cost is the value of the next best alternative foregone. In this case, the opportunity cost is utility gained from eating flank steak.
b). This cost of $10 or $100 paid for the concert ticket will not affect the decision. This cost is already incurred and will not affect the cost or benefit of going or not going to the concert.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.