Meridith had only $16 to spend this last weekend.She was,at first,uncertain about whether to go to two movies she had been wishing to see or to buy a new CD she had recently heard.In the end she went to the movies.Which of the following statements is correct?
A)The choice of the two movies and not the CD is an example of increasing costs.
B)The opportunity cost of the two movies is one CD.
C)The opportunity cost of the two movies is $16.
D)The choice of two movies rather than one CD was a bad one.

Question

Quizplus · Accepted Answer

The opportunity cost of choosing to go to the movies instead of buying the CD is one CD. Opportunity cost is the value of the next-best alternative that must be given up in order to pursue a certain action. In this case, Meridith gave up the opportunity to buy the CD when she chose to go to the movies, so the opportunity cost is equal to the value of the CD she could have purchased. Therefore, option B is the correct statement.

Meridith Had Only $16 to Spend This Last Weekend