Suppose Mike has three hours of time to spend and he sets the following activities in order of priority: (1)see a movie; (2)attend a ball game; (3)study economics.Assume that each activity takes three hours.What is Mike's opportunity cost of seeing the movie?
A) attending a ball game and studying economics
B) studying economics
C) attending a ball game
D) either attending a ball game or studying economics

Question

Quizplus · Accepted Answer

The opportunity cost of seeing the movie is the value of the next best alternative that Mike has to give up in order to see the movie. In this case, the next best alternative is attending a ball game, which is the activity with the next highest priority. Therefore, the opportunity cost of seeing the movie is attending a ball game.

Studying economics is the least preferred option for Mike, so it is not a relevant opportunity cost in this case. The choice between attending a ball game and studying economics is not relevant either, since both activities have the same priority and neither is more important than the other. Therefore, the best choice is C: attending a ball game is the opportunity cost of seeing the movie.

Suppose Mike Has Three Hours of Time to Spend and He