Gilberto is an owner of a professional sports team in a larg

Gilberto is an owner of a professional sports team in a large league. To promote fairness, the team with the most losses in the league automatically gets the best new player to enter the league next year. Consider the following sentence: In order to get the best new player next year, Gilberto orders his team to intentionally lose as many games as possible. Which basic concept of individual choice does this sentence best illustrate? Opportunity costs and money costs (price) are related, but not always exactly the same. Externalities are a shortcoming of the market. All costs are opportunity costs. An optimal decision is one that best serves the objectives of the decision maker.

Solution

Answer:

Gilberto is a rational decision maker for his team. According to the rule of the league the team with most losses in the league will automatically get the best new players for next league. So Gilberto orders his team to lose as many games as possible. He knows the opportunity cost of losing the games is near to zero.

Opportunity cost is the forgone interest of the person that means what could have been produced instead of this produced product if it would not been produced. If team loses in this league it is not prestigious for this team right now but it can increase the possibility of wining in the next league. If this team loses many games in this league then they will get lower amount of money compared to the wining team. This loss is nothing if they will get many new good players in the next league as then Gilbert has the change of getting more money. New team will has high chance of win the next league and earn more money compared to the old team. So the opportunity cost of losing those games is very low so it is beneficial to lose the games and will get high return in future.