Question

Question 1) Sophia’s friends have invited her to see a movie the following weekend. The movie ticket costs $15. Alternatively, during the time she would be at the movies, she could choose between one of the following two options:

i. Work at a café and earn $40.

ii. Go to a concert. The ticket to the concert is $20, and she values this experience at $50,

Based on the above information, what is Sophia’s opportunity cost of going to the movie?

A. $15

B. $55

C. $40

D. $65

Question 2) Daniel decides to spend an hour playing cricket. He has to pay $10 for admission into the sport complex where he plays cricket. His next-best alternative is to work at a café and earn $16 per hour. Based on the above information, what is Daniel’s opportunity cost of playing cricket?

a) $10

b) $16

c) $26

d) $6

Please explain your answers.

Answer 1

1. The right option is "B. $55".

Opportunity cost is the cost of the next best alternative. Sophia can go to see a movie which costs her $15 or could work in a cafe to earn $40 or a concert to entertain herself which she values for $50 and which costs her $20. Therefore, the best alternative would be to work in a cafe and earn $40. By doing this, she could avoid go seeing the movie costing her $15. Therefore, total opportunity cost would be = $40 + $15 = $55.

2. The right option is "C. $26".

Opportunity cost in this case would be working at a cafe for $16. This means he will not have to pay $10 for admission into sport complex. Total opportunity cost = $16 + $10 = $26.