You’ve purchased a non-refundable ticket to a concert happening next weekend. One day before the event, a family member offers to take you on a fully paid weekend trip to a destination you’ve always wanted to visit. Reflecting on the money already spent on the concert ticket and the value of the trip, explain how the principles of sunk cost and opportunity cost should guide a rational person’s decision on whether to attend the concert or go on the trip.
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You have bought a $\$ 10$ ticket in advance for the college soccer game, a ticket that cannot be resold. You know that going to the soccer game will give you a benefit equal to $\$ 20$. After you have bought the ticket, you hear that there will be a professional baseball post-season game at the same time. Tickets to the baseball game cost $\$ 20$, and you know that going to the baseball game will give you a benefit equal to $\$ 35$. You tell your friends the following: "If I had known about the baseball game before buying the ticket to the soccer game, I would have gone to the baseball game instead. But now that I already have the ticket to the soccer game, it's better for me to just go to the soccer game." Are you making the correct decision? Justify your answer by calculating the benefits and costs of your decision.
The default option for you on any Saturday night is to stay at home and watch Netflix, which gives you utility worth Rs. 4000, and no cost is incurred. You also receive free, non-transferable passes to two events that are scheduled for this Saturday, which you would love to attend. The first one is an IPL match that is being played in your city, for which you are willing to pay as much as Rs. 5000 to watch. The other option is a concert by your favorite band, for which you are willing to pay as much as Rs. 20000 to attend. This concert is in another city so you will incur an additional transportation cost of Rs. 5000. (a) What is your opportunity cost of watching the IPL match? Explain. (b) What is your opportunity cost of going to the concert? Explain.
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You have good tickets to a basketball game an hour's drive away. There's a blizzard raging outside, and the game is being televised. You can sit warm and safe at home and watch it on $\mathrm{TV}$, or you can bundle up, dig out your car, and go to the game. What do you do? Source: Slate, September 9,2005 a. What type of cost is your expenditure on tickets? b. Why is the cost of the ticket irrelevant to your current decision about whether to stay at home or go to the game?
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