Recitation 1

Opportunity Cost
1. You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob
Dylan is perforin! on the sae ni!ht an" is your ne#t$best alternative activity. %ickets
to see Dylan cost &'(. On any !iven "ay) you woul" be willin! to pay up to &*( to see
Dylan. +ssue there are no other costs of seein! either perforer. Base" on this
inforation) what is the opportunity cost of seein! Eric
Clapton,
a. &(
b. $10
c. &'(
". &*(
(-ow woul" your answer chan!e if you coul" resell the Eric Clapton ticket for &1(()
.. /teve bou!ht a fully refun"able plane ticket to 0lori"a for /prin! Break) which cost
hi &1*(. + week before /prin! Break) /teve1s rooate -arry invites /teve to coe
stay with hi in 2ew York over break. %rain tickets to 2ew York cost &*() an" /teve
knows that he will !et &.*( worth of benefit if he !oes to 2ew York. 3hat is /teve1s
opportunity cost of !oin! to 0lori"a,
a. &1*(
b. $350
c. &.((
". &.*(
(-ow woul" the answer chan!e if the ticket was non refun"able,)
4. Ellie1s %ues"ay ornin! class was cancelle"5 /he now ust "eci"e how to spen" her
e#tra$tie. /he has three) utually e#clusive) options for activities6 !o to the library an"
stu"y for her Econ i"ter) which costs her nothin! an" which she values at &1() !o to a
ovie) which costs her &* an" which she values at &4() or have lunch with a frien")
which costs her &1( "ollars an" which she values at &**. 3hat is the opportunity cost of
havin! lunch with her frien",
a. (
b. 1(
c. .*
d. 35
e. '(
f. '*
!. *(
(-ow woul" your answer chan!e if the ovie was value" at &1.,)