Question

Suppose you learn that your friend is serving flank steak at her​ party; all-you-can eat and at no charge. Flank steak is your favorite food. Your opportunity cost of going to the concert is now
a.higher
b.lower
c.than you had previously thought.

Answer 1

Answer:

a.higher

Explanation:

Note: The answer provided herein is based upon the fact that option (c) does not mention higher or lower. In the given case, opportunity cost would be higher than previously thought of but since the word "higher" is not mentioned in option (c), it has not been considered.

Opportunity cost refers to benefits foregone of a non chosen alternative when another alternative is chosen from available set of alternatives.

Initially without knowledge of what was to be served at the party, an opportunity cost existed which was the option foregone of attending the party as other option of going to the concert had been decided in the mind.

The explicit cost i.e the cost in monetary terms remained the same as previous in the given scenario. But now, the implicit cost in the form of opportunity cost gets affected.

After knowing that an individual's favorite food item is served free of cost at the party, one had decided to forego, one would be at least tempted to reconsider his decision for once.

This implies that the opportunity cost has increased from the previous level.

Hence, the correct option is (a) higher.