You Have Bought a $500 Ticket Package to Take All

question 21

Essay

You have bought a $500 ticket package to take all of your family to Sea World on the first weekend in June. Your spouse has free passes to an IMAX viewing of Jaws for the same day. The morning of your outing, you notice storm clouds coming in and the weatherman says that there is a 95% chance of rain and lightning. You think that it might make more sense to go to the IMAX showing, but you paid significantly more for Sea World. Where would you be more likely to go? Name this phenomenon and briefly describe the premise of this type of cognitive error.

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Definitions:

Efficiency

The optimal allocation of resources to maximize the production of goods and services.

Total Surplus

The total net gain to society from creating and using goods and services, shown by adding together consumer and producer surplus.

Total Surplus

The sum of consumer and producer surplus, representing the total net benefit to society from the production and consumption of a good or service.

Gains From Trade

Gains achieved by dividing tasks and trading; in this way people can get more of what they want through trade than they could if they tried to be self-sufficient.