OpportunitycostisakeyconceptinEconomics.Thetextbookdefinestheopportunity cost as the best…
OpportunitycostisakeyconceptinEconomics.Thetextbookdefinestheopportunity cost as the best alternative that must be given up to obtain some item. The following questions help you get a better understanding of this concept through some real life scenarios:
- (a) (1 mark) Suppose you won a free ticket to see a Coldplay concert tonight. You can’t resell it. Powderfinger is performing on the same night and their concert is the only other activity you are considering. A Powderfinger ticket costs $40 and on any given day you would be willing to pay as much as $50 to see them perform. In other words, if Powderfinger tickets sold for more than $50, you would pass on the opportunity to see them even if you has nothing else to do. There is no other cost of seeing either band. According to the information pro- vided, what is your opportunity cost of attending the Coldplay concert? Please briefly explain your answer.
- (b) SupposeyouneedtobuyatextbookforMAE101.ThepriceattheDUSAbook- store is $120. Fishpond.com, an online book retailer, offers a textbook for $100,3
while another website, Amazon.com, offers it for $110. All prices include GST. The following table indicates the typical shipping and handling charges for the textbook ordered online, which are identical in both websites.
- (i) (1 mark) What is the opportunity cost of buying online instead of at the bookstore?
- (ii) (1 mark) List all the relevant choices for you getting the textbook.
- (iii) (1 mark) As a smart college student, some of these choices are clearly inefficient. In other words, there are ways to achieve the same outcome with a lower cost. Please list all the efficient choices available to you. Among them, what determines which of these options you will choose?
