Question

Joe College's parents pay for his room and board, tuition, and books for going to a university. They also give him some spending money which he spends on going to the pub or to the movies. Suppose that Joe's spending money doubles and the price of movies doubles. Determine the impact of these changes by evaluating the following statements. Statement l Statement II Statement III:The opportunity cost of going to the movies or the pub does not change. The opportunity cost of going to the movies rises and the opportunity cost of going to the pub stays the same. It is now possible for Joe to spend more at the movies and at the pub Which statement or statements are true? O A. only O B. Il only O C. IlIl only O D. Il and IlII only O E. I and IlIl only

Answer 1

B is correct

Increase in price of money increases the opportunity cost of going to the movies and reduces the opportunity cost of going to the pub.

With increase in money he can spend more on pubs and movies.