• You won a free ticket to see the opening premier of the next Star Wars Movie (
ID: 1103421 • Letter: #
Question
• You won a free ticket to see the opening premier of the next Star Wars Movie (Episode XX :) for simplicity assume the ticket has no resale value. • Star Trek’s new movie “The Wrath of Economics” is opening the same night, and this movie represents your next-best alternative. Tickets to the Star Trek movie cost $15, and you would be willing to pay up to $20 to see the premiere. Assume there are no additional costs. Based on the information presented here, what is the opportunity cost of seeing the Star Wars movie.
Explanation / Answer
Solution: Opportunity cost will equal $5
Explanation: Opportunity cost is the value of your next best alternative. In this scenario, the next best alternative is watching Star Trek’s new movie. Your value for this alternative is $20 with a corresponding cost of $15 leaving a net value of $5
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