Meredith had only $10 to spend last weekend. She was, at first, uncertain whether to go to see a new movie or to rent two videos she has been told were good. In the end she rented the videos. Which of the following statements is correct?
A) The choice of the two videos and not the movie at the theatre is an example of increasing costs.
B) The opportunity cost of the two videos is one theatre movie.
C) The opportunity cost of the two videos is $10.
D) The choice of two videos rather than one theatre movie was a bad one.

Question

Quizplus · Accepted Answer

The opportunity cost of choosing one option is the value of the next best alternative forgone. In this case, by choosing to rent two videos, Meredith gave up the opportunity to see a new movie at the theatre, making the movie the opportunity cost of her decision.

Meredith Had Only $10 to Spend Last Weekend