Question

One of the most serious omissions of economic impact studies is their failure to account for the Opportunity Costs of investing in new sports facilities. First, define the concept of opportunity costs. Why is it considered the fundamental social issues associated with government investment in sport? Provide an example of the opportunity costs associated with the use of public monies for the construction of a new stadium. Why is it critical for public jurisdictions to take into account the opportunity costs related to financing sports facilities?

Answer 1

Opportunity Cost- It is the cost of an alternative that was not chosen because some other alternative had been chosen. It also refers to the benefits that missed out due to switch to another alternative. It can also be understood the lost benefits of valuable choice that was not taken.

Formula: Opportunity cost = Return on best foregone option - Return of chosen option

Why is it considered the fundamental social issues associated with government investment in sport?

It is a fundamental social issue because this is Government's duty and responsibility to do good for society and people. If Government invests into sport facilities, other investment alternatives will be left that are equally or more important. These alternatives are:

For example:

1. Infrastructure (Highways, Bridges, Metro, Buildings, commercial space, schools, colleges etc.)
2. Public transportation facilities.
3. Providing shelter to poor and homeless people.
4. Mid day meal to poor kids.

Provide an example of the opportunity costs associated with the use of public monies for the construction of a new stadium.

Example: Income and other taxes, paid by public to the Government that Government uses as public expenditures. Income tax paid by us is the revenue for Government but it should utilize the money in a proper manner so that everyone will be benefited.

Why is it critical for public jurisdictions to take into account the opportunity costs related to financing sports facilities?

Money that is being spent to build stadium, can be spent on infrastructure, education or transportation that will provide benefit to all. All people in the country do not play sports but only few. People will find their ways of entertainment. Opportunity cost is that money should not be invested on sports stadium, it should be spent on other alternatives.