Question

To determine the opportunity cost of Sam going to the cinema, we need to consider his next best alternative that he had to give up. The scenario mentions:

First choice: go to a cricket match
Second choice: watch the annual town parade
Third choice: go to the cinema
Fourth choice: visit relatives

Answer 1

In this scenario, the opportunity cost of Sam going to the cinema would be either going to the cricket match or watching the annual town parade, whichever one he values more. If he values going the cricket match more than going to the cinema, then the opportunity cost would be missing out on the cricket match. Similarly, if he values watching the annual town parade more, then the opportunity cost would be missing out on the parade.
The key is to identify the next best alternative that Sam had to give up in order to go to the cinema. This is the opportunity cost of his decision.