Question

Suppose that Lorenzo knows that the fine for parking this way is $100, and his opportunity cost (OC) of searching for parking is $30 per day. That is, if he parks on the sidewalk and does not get a ticket, he gets a positive payoff worth $15; if he does get a ticket, he ends up with a negative payoff worth ________.

Answer 1

If Lorenzo parks on the sidewalk and receives a ticket, he would have a negative payoff of $100. The opportunity cost of searching for parking is $30 per day.

Step-by-step explanation:

The negative payoff that Lorenzo would end up with if he got a parking ticket is $100. This means that if Lorenzo parks on the sidewalk and receives a ticket, he would have a negative payoff of $100. The opportunity cost of searching for parking is $30 per day, so if Lorenzo chooses to search for parking, he is giving up the potential gain of $30 he could have earned doing something else.