Answer to Question #167419 in Microeconomics for Kyla Mombay

Question

You are planning to spend Saturday working at your part-time job but a friend asks you to see a movie at your favorite theater and artists. What is the true costs of going to a movie? Now, suppose you had been planning to spend the day studying at the library. What is the cost of going to a movie in this case. Explain

                                

Answer 1

If I go to watching the movie, then watching the movie with friends will be the cost related to watching the movie and the loss of wages from the part-time job.

 

If I were to go to watching the movie instead of going to the library, then the cost of watching the movie will be the cost related to going to watch the movie along with the value of the knowledge that would have been added in studying at the library. However, the value of knowledge addition cannot be measured in money terms. The measurement depends on a person's own perception.

 

 

Explanation:

As the resources are limited, but the wants are unlimited, it is important to choose between various alternatives because everything cannot be acquired.

This results in the presence of opportunity cost. The opportunity cost refers to the loss of benefit associated with an alternative when an individual chooses another alternative.

The total cost associated with an option also includes its opportunity cost, which is the benefit given up.

In the given case, we are given two cases where an individual chooses skiing instead of working at a part-time job. In another case, the individual chooses a movie rather than the previous plan of studying at the library.

Case 1:

The total cost of activity includes the monetary cost incurred to perform that activity, along with the value of time which could be used to perform other activity, and the loss of benefit associated with other alternatives which have to be given up.

In this case, as the person does not spend Saturday working at the part-time job, but goes to watch a movie, then the true cost of watching the movie will include:

·        Cost of buying the movie ticket.

·        Income foregone from the part-time job, which could have been earned if the person worked on Saturday instead of watching a movie.

Case 2:

In this scenario, the individual opts for going to the movie in place of spending a day at the library.

The true cost of going the watching a movie will be:

·        The cost associated with the movie tickets.

·        The cost associated with the transport to go to the movie

·        The foregone knowledge which the individual must have acquired if he studied at the library.

·        The intellectual knowledge foregone is also the cost of watching the movie.