Question

Suppose you find Rs 100, if you choose to use Rs 100 to watch IPL match, your opportunity cost of going to watch IPL match is _________.

• A. Nothing because found money
• B. Rs. 100 (Because you could have Rs. 100 to buy other things) plus the value of time spent at game plus the cost of dinner you purchase at that time
• C. Rs. 100 (Because you could have Rs. 100 to buy other things) plus the value of time spent at game
• D. Rs 100 (Because you could have Rs. 100 to buy other things)

Hint:

Opportunity cost is not just about the money spent.
Always remember to include the value of your time (implicit cost) in addition to the cash outlay (explicit cost) when evaluating economic decisions.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Opportunity cost is a fundamental concept in economics defined as the value of the next-best alternative forgone when a choice is made.
It includes both explicit costs (direct monetary outlays) and implicit costs (non-monetary costs, such as the value of one's time).

Step 2: Detailed Explanation:
Let us analyze the components of opportunity cost in this scenario:
1. Monetary Cost (Explicit Opportunity Cost):
Even though the Rs 100 was found and not earned, choosing to spend it on the IPL match means you can no longer use that Rs 100 to buy other goods or services.
Thus, the opportunity cost of the money spent is Rs 100.
2. Time Cost (Implicit Opportunity Cost):
Watching the IPL match requires several hours of your time.
The opportunity cost of this time is the value of the next-best activity you could have performed during those hours (such as working, studying, or resting).
Therefore, the total opportunity cost is the sum of the monetary value (Rs 100) and the value of the time spent at the game.
3. Exclusion of Dinner:
The cost of dinner is typically not included in the opportunity cost of the match unless you bought a more expensive dinner solely because you attended the game.
Since you would have eaten dinner anyway, the basic cost of food is not a forgone alternative unique to watching the match.

Step 3: Final Answer:
The total opportunity cost is Rs. 100 plus the value of time spent at the game (Option C).