Opportunity Cost

[Braque]

Hypothetical situation:

You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer.

Question:

Based on this information, what is the opportunity cost of seeing Eric Clapton?
(a) $0,
(b) $10,
(c) $40, or
(d) $50.

 

[Careface]

c, tickets cost $40 don't they?

In reality though it's around $1000, as Dylan didn't cover one song then write sub par dad rock for the rest of his career.

 

[Bani]

$10

 

[Lonei]

I vote $10, and not just cause Bunny did and he's smart so I could prolly just copy him and get the answer right.

 

[Ayu]

$0 because you would be willing to pay $50 to see Dylan anyway.

 

[Anshrr]

I have no idea what an "opportunity cost" is, nor would I go see Clapton or Dylan. So I chose (e) I'M WAY AWESOME

 

[Gink]

Dylan, whatever the fuck the cost is.

 

[Careface]

IF IT DOESN'T HAVE A POWER CHORD AND A ANGRY MAN IM NOT LISTENING TO IT.

 

[Bani]

It's $10 because by seeing Clapton you're missing out on getting a $50 value for $40 instead.

 

[Careface]

I thought the opportunity to see Bob Dylan would have been $40 though, therefore thats the cost :/
Guess I'm just looking at this backwards. And favouring Dylan. I listened to him for 3 hours earlier because of this thread. Forgot how good 'You ain't goin' anywhere' is.

 

[Braque]

It's $10 because by seeing Clapton you're missing out on getting a $50 value for $40 instead.

Banista is correct.

But don't feel bad if you didn't get it, apparently 78% of professional economists get this wrong as well.

 

[Bani]

I thought the opportunity to see Bob Dylan would have been $40 though, therefore thats the cost :/

Opportunity cost is a term with a precise meaning in Economics, not necessarily the one you'd guess from reading the word :yes:

http://en.wikipedia.org/wiki/Opportunity_cost

 

[Galatea]

Dylan, whatever the fuck the cost is.

I guessed right! but I'd CHOOSE "wrong"

 

[Tbone]

I'd sell the ticket, if someone would pay $50 to see bob, they'd pay $60 to see bob&eric. There's always some schmuck you can sell it to.

 

[Ayu]

I'd sell the ticket, if someone would pay $50 to see bob, they'd pay $60 to see bob&eric. There's always some schmuck you can sell it to.

Fact 1: Tbone is generally broke.
Fact 2: Tbone just gave an advice on how to make money.
Fact 3: ???
Fact 4: NO PROFIT

 

[Tbone]

I'm broke coz I DONT have access to free tickets.

If I did, I wouldn't b broke

It's like a one legged PE teacher, they know what to do, they just physically can't do it