Michael is a fan of the Rhinos-the local professional soccer team. At the beginning of the season, he purchased nonrefundable season tickets to their 10 home games for a total of $100. Michael places equal value on each of the home games. His value for any given game is independent of how many other games he attended during the year. Michael would be willing to stay at home, which he derives no benefit from, and miss an individual game, if he could sell the ticket for one game for $20 or more.
Michael has attended three out of the last five home games. The sixth home game of the season is tomorrow night. Michael's friend Fred has offered to sell him an extra ticket to a sold-out concert for $50 that happens to be on the same night as the game. Normally, Michael would be willing to pay $70 to attend the concert. There is no way that Michael can attend both the Rhinos' game and the concert. Looking online, Michael finds that he can sell his ticket for tomorrow night's Rhinos' game for $5.
a. What type/types of cost is the $100 that Michael paid for the season tickets? Explain why.
b. Which event will Michael decide to attend? Explain why.
c. How much would Fred have to charge Michael for the concert ticket in order to make Michael not care which event he attended? Explain why.