Question

You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes into the show you realize that it is not a very good show and place only a $10 value on seeing the remainder of the show. Alternatively you could leave the theater and go home and watch TV or read a book. You place an $12 value on watching TV and a $8 value on reading a book. 1.You should go home and watch TV. 2.You should go home and read a book. 3.You should stay and watch the remainder of the show. 4.You should go home and either watch TV or read a book.

Answer 1

Answer:

1) You should go home and watch TV.

Explanation:

Since you value seeing the play $10, then you should leave the theater and go to your house to watch TV since that has a higher value for you ($12).

We are talking about opportunity costs here. Opportunity costs are the extra costs or benefits lost from choosing one activity or investment over another. In this case the opportunity costs are:

• watch the play = $10
• watch TV = $12
• read a book = $8

Since watching TV is more valuable to you, then that is what you should be doing.