Question

You have two choices for how you are going to spend Saturday evening. You can go to the pub

with your friends, which will cost you £30 for the evening. The pleasure you anticipate from
this experience is worth £50 to you. Or you can go to the theatre. The ticket will cost you £50,
but you value the experience at £60. Based on this information, which of the following
statements is correct? [2 points]
A. The opportunity cost of an evening at the theatre is £10.
B. The economic cost of going to the theatre is £60.
C. The economic rent of going to the theatre is -£10.
D. Based on economic rent alone, you would choose to go to the theatre.

Answer 1

Based on the information provided, the correct statement is:

A. The opportunity cost of an evening at the theatre is £10.

Opportunity cost refers to the value of the next best alternative that you give up when making a decision. In this scenario, the opportunity cost of going to the theatre is the value you assign to the pub experience (£50) minus the value you assign to the theatre experience (£60), which equals -£10.

The economic cost of going to the theatre is the actual monetary cost of the ticket (£50), so option B is incorrect.

The economic rent of going to the theatre is not applicable in this context, so option C is incorrect.

Based on economic rent alone, we cannot determine the preferred choice as it does not take into account the pleasure or value associated with each option, so option D is incorrect.

Therefore, the correct statement is A. The opportunity cost of an evening at the theatre is £10.

Step-by-step explanation: