Question

Lucinda purchases a raffle ticket for $5. Just before the grand prize drawing two people tried to buy her a ticket. The first person offered $25, and another later offered $60. What is Lucinda's opportunity cost of keeping the raffle ticket?

Answer 1

Lucinda's opportunity cost of keeping her raffle ticket is the highest bid she received for the ticket, which is $60.

Step-by-step explanation:

Lucinda's opportunity cost of keeping her raffle ticket is the net benefit she foregoes by not accepting the highest bid for her ticket. The highest amount offered for the ticket was $60. Therefore, Lucinda's opportunity cost is $60, which is the foregone profit she could have realized had she sold the ticket to the willing buyer offering the most money. This is because the concept of opportunity cost holds that it is not just the monetary cost that should be considered, but also the lost opportunity to engage in the next best alternative (in this case, selling the ticket for $60).