Question

You and a friend decide to spend​ $100 each on concert tickets. Each of you alternatively could have spent the​ $100 to purchase a​ textbook, a meal at a highly rated local​ restaurant, or several internet movie downloads. As you are on the way to the​ concert, your friend tells you that if she had not bought the concert​ ticket, she would have opted for a restaurant​ meal, and you reply that you otherwise would have downloaded several movies. The relevant opportunity costs for you and your friend of the concert tickets that you purchased are

Answer 1

The opportunity cost is the cost that is generated by selecting some other alternative. The opportunity cost indicates the value or activity that is foregone to do something else.

In our case, me and my friend decided to go on a concert and concert ticket price is $100.

There are other three alternatives available for me and my friend other than concert:

(i) purchase a​ textbook worth of $100.

(ii) meal at a highly rated local​ restaurant

(iii) internet movie downloads

It was given that my next best alternative to the concert is internet movie downloads and my friend's next best alternative to the concert is meal at a highly rated local​ restaurant.

Hence,

The opportunity cost for me and my friend of the concert tickets that we purchased are internet movie downloads and meal at a highly rated local​ restaurant, respectively.