You are given a free ticket to see the Trojans mens basketball team play for the
ID: 1193035 • Letter: Y
Question
You are given a free ticket to see the Trojans mens basketball team play for the league championship. The LA Lakers are playing on the same night and is your next-best alternative activity. Tickets to see the Lakers cost $40. on any given day you would be willing to pay up to $50 to see the Lakers Play. Assume there are no other costs of attending either Game. Based in this inforamtion, the opportunity cost of going to the Trojans mens basketball game is (CHOOSE the BEST ANSWER)
a.)$0 b.)$10 c.)$40 d.)50Explanation / Answer
Opportunity cost is the cost of next best alternative. Here the person has ticket for Trojans mens basketball match. Next best alternative is LA Lakers match. Thus watching Trojans match will mean you are sacrificing LA Lakers match. So amount of satisfaction you are sacrificing by not watching the Lakers match is the opportuity cost.
According to Prof. Marshall utility derived from a commodity is measurable. It is the amount that a person is ready to sacrifice for getting that commodity. Here the person is ready to pay $50 for the LA Lakers match although the price is $40. So by watching this match you are getting satisfaction of $50. If it is not watched, then the utility of $50 is lost. So $50 is the opportunity cost of watching Trojans mens basketball. He will watch this match only when he is getting satisfaction of more tha $50 from this match.
Answer: Best answer is option d) i.e. $50.
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