You enjoy going to the cinema on a Saturday afternoon It cos

You enjoy going to the cinema on a Saturday afternoon. It costs 6 while the maximum amount you would be willing to pay is 20. The best alternative use of your time would be to work in a fast food restaurant. You find the job unpleasant and would be unwilling to work for less than 25. The actual rate of pay is 40. You are free to take a Saturday afternoon off whenever you want without damaging your future employment prospects at the restaurant. What is the opportunity cost of going to the cinema on a Saturday?

a. £40.

b. £15.

c. £20.

d. £14.

e. £65.

Solution

Correct Answer:

Explanation:

Person has two options. Either to watch cinema or going to work. If he goes to watch cinema them he will miss the work that will pay £ 40. Thus, opportunity cost of watching cinema is £ 40.