Fred and Ann Both Decide to See the Same Movie

question 387

Multiple Choice

Fred and Ann both decide to see the same movie when they are given free movie tickets. We know that

• A)both bear an opportunity cost since they could have done other things instead of see the movie.
• B)both bear the same opportunity cost since they are doing the same thing.
• C)the cost of going to the movie is greater for the one who had more choices to do other things.
• D)neither bears an opportunity cost because the tickets were free.

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Definitions:

Gain on Disposal

The profit earned from selling a capital asset for more than its book value.

Straight-line Method

A method of calculating depreciation of an asset, dividing the difference between its cost and salvage value by the total number of years it is expected to be in use.

Salvage Value

The expected financial return on an asset at the time of its disposal after its serviceable life has concluded.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.