Question

You've won a FREE ticket to the Toronto Maple Leafs hockey game (which has ZERO re-sale value). The Toronto Raptors Basketball team is playing on the same night and is your next best alternative activity. Tickets to the Toronto Raptors cost 40$ HOWEVER on any given day, you would be willing to pay up to 50$ to see the Toronto Raptors. Assume that there are no other costs associated with seeing either game. Based on this information, what is the opportunity cost of seeing the Toronto Raptors?

You've won a FREE ticket to the Toronto Maple Leafs hockey game (which has ZERO value). The Toronto Raptors Basketball team is playing on the same night and is your alternative activity. Tickets to the Toronto Raptors cost 40$ HOWEVER on any given d would be willing to pay up to 50$ to see the Toronto Raptors. Assume that there are no associated with seeing either game. Based on this information, what is the opportunity seeing the Toronto Raptors?

Answer 1

Opportunity cost is defined as the cost of any activity in terms of value of next best alternative forgone.

the same can be calculated by the formula i.e. Opportunity cost = Return on the forgone option - return on the chosen option.

therefore in the instant case the return that a person would have got watching game of Toronto Raptors Basketball team would have been of $50.

and the return that a person would have got watching game of Toronto Maple Leafs hockey game would be $ 40.

therefore the Opportunity Cost = $50 - $40 i.e. $10.

Opportunity cost of watching game of Toronto Maple Leafs hockey will be $10.