Question

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

Answer 1

Answer: The amount you value the first movie + $3

Explanation:

Opportunity cost is the cost of the next best alternative foregone. It can be expressed as the value of the good you loose. If the person decides to see the new release with his friend, he is foregoing the value of the previous movie that he wanted to watch as well as loosing the value of the coupon ($3) which is valid for the other movie only. Thus, his opportunity cost is the amount you value the first movie + $3.