Economically speaking, why should I go home and read a book in the following scenario?You prchase a $30 nonrefundable ticket to a play at a local theater.minutes into the show you realize  it is...

Economically speaking, why should I go home and read a book in the following scenario?

You prchase a $30 nonrefundable ticket to a play at a local theater.minutes into the show you realize  it is not a very good show and you place only a $10 value on seeing the remainder of the show. Alternatively you could leave  theater and go home and watch TV or read a book.place an $8 value on watching TV and a $12 value on reading a book.

 

a.

You should stay and watch the remainder of the show.

b.

You should go home and watch TV.

c.

You should go home and read a book.

d.

You should go home and either watch TV or read a book.

 

answer is c  but ıdont understand why c?

Asked on by blanco11

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

The reason that C is right is because that is the option that gives you the most value for your time spent.  If you watch the show, you get $10 of value.  If you watch TV you get $8 so watching TV is worse than staying at the play.  But if you read a book, you get $12 worth of value, which is better than the $10 you get from staying at the play.

I assume that your problem comes from the fact that you've already spent $30.  Maybe you feel like you'll waste that $30 if you go home now.  But economists call that a "sunk cost."  You've already spent that money and it should have no influence on what you do next.  What you do next should depend only on how much value you will get for it.  So never mind the $30--it's gone and you'll never get it back. Just pick what you can do next that will have the greatest value for you.  That choice is to go home and read.

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