Question

Suppose you have three choices as to what to do for two hours on Sunday afternoon: work around the house, earning $3.50 an hour; baby-sit for your neighbor earning $10 an hour; or go to the movies and pay $6 for a ticket. You choose to go to the movies. What is your opportunity cost?

Choices: $3.50, $10, $13.50, $27, or $26

Please explain? Thanks!! :)

Answer 1

well I'd this it's something like expected value in probability

probability x payoff... and the movie payoff is a negative

that's my best guess

Answer 2

but it's only a guess

Answer 3

opportunity cost is the cost of giving up something, when we make a choice, we are losing something, or rather attributing some value of one over another

Answer 4

Opportunity cost is the lost income that you didn't get because of your choice to do something else.

You could make $3.50/hr * 2 hr = $7 putzing around the house
You could make $10/hr * 2 hr = $20 babysitting

instead you spent $6

Your opportunity cost is $20, because that was the best alternative you passed up.

Answer 5

so the cost of going to the movies is that you lost the money you could have gained doing the other stuff, plus 6 more dollars is my stab at it

Answer 6

ahh okay :) i don't have $20 as a choice though :/

so would it be 20+6 =26 ?

Answer 7

is 26 an option? :)

Answer 8

yes:)

Answer 9

You had the opportunity to make $7 or $20 by doing various jobs, but because you went to the movie, the opportunity was lost. The opportunity cost is the maximum value you could have obtained by making a different choice.

Yeah, I don't agree that $26 is a correct answer. Your opportunity cost is $20, no matter whether you spent money or not.

Answer 10

ohh okay :) thank you both!!! :D

Answer 11

yeah, i spose you couldnt have made both the choices tha tyou didnt make to start with

Answer 12

oh so would it just be $10 then? since it's 10 per hour?

i don't have $20 as a choice :/

Answer 13

Well, clearly $26 is the expected answer here, and you have to go with what the person who wrote the question wants.

Answer 14

If $10 is an answer choice, I think it is there as a trap for the unwary. The problem states that you can work 2 hours, so the value being passed up is either $7 (working at home) or $20 (babysitting at the neighbor's).

Answer 15

ohh okay so really the answer should be $20 opportunity cost?

Answer 16

Suppose you have three choices as to what to do for two hours on Sunday afternoon:

work around the house, $7;
baby-sit: $20;
movies: $6

sposing we do greatest values

20/6 or 6/20 might be of use ??

Answer 17

not sure! :/

20/6 would be 3.33333...
and 6/20 would be .3 so i'm guessing no? :/

and also, i was wondering, so if two friends have the same choice of activities on a Wednesday evening, would they each have the same opportunity cost for their choices? i think that they don't right? because they might both choose different options? resulting in a different opportunity cost for each?

Answer 18

@whpalmer4 @amistre64 ? :/

Answer 19

Well, did some more reading, and I think $26 is correct, at least by some definitions. Apparently you do include the direct cost of your chosen alternative ($6) in addition to the foregone value ($20).

Answer 20

ahh okay:) thank you!!

what do you think about the two friends part?

Answer 21

Can Bob and Fred both be paid $20 for babysitting at the same time? (presumably different places) If so, they have the same opportunity cost in going to the movie.

Answer 22

ahh okay thanks so much!! :D