Due January 29 Please answer directly on the homework sheet, using the space pro

Question

Due January 29 Please answer directly on the homework sheet, using the space provided. (1-4) Multiple choice. Circle one answer. No explanation is required. Use the following information for questions 1-4: A rational individual named Lars is contem- plating attending a concert in the evening. His best alternative is to work. If Lars decides to go to the concert, he simply has to let his boss know that he will not be coming to work in the evening. The benefits and costs related to the concert and to Lars's job are shown in the table below. Note that Lars finds his job so pleasant that he would be willing to pay to do it. Best alternative (work) Lars would earn = $80 It would be pleasant $10 (positive willingness to pay for working) Expenditure on gas $4 Concert Reservation price = $B Price of ticket = S50 Expenditure on gas $8 1. (1 point) Suppose Lars does not yet own a ticket for the concert. What is the opportunity cost of the concert? a. $80 b. $10. c. $144. d. It depends on the value of B. Use the following information for questions 2 and 3. Suppose Lars bought a ticket for the concert. When he did so, he was indifferent between buying the ticket and not buying it (so he had to flip a coin). 2. (1 point) What is B equal to? a. $50 b. $80. c. $10. d. $144. (1 point) Now the ticket is non-refundable and has no resale value. Which of the following 3. is TRUE? a. If Lars gets a $20 raise at work, then he will NOT go to the concert b. If Lars gets a $60 raise at work, then he will NOT go to the concert. c. If Lars does not get a raise at work, then he will surely go to the concert. d. Both a and b are correct. e. Both b and c are correct

Explanation / Answer

Ans 1) ans is A becauseLars could have worked and could have earned $80. Because Opportunity cost is the second best alternate forgone.

Ans 2)ans is D. Since $50 already had been given and additional he would have to incur opportunity cost and gas expemditurr. Thus to be indifferent B should be 50+10+4+80=144

Ans 3) And is D

Both A and B is correct because total cost for going to concert increases and lars will not go.

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