Question

You have a ticket to go to a concert by one of your favorite​ groups, the​ Hives, which you cannot resell. ​ However, you can buy a ticket for ​$4040 to attend a talk by Steven​ Colbert, at the same time as the concert. You are willing to pay up to ​$8080 to hear Colbert. Given that there are no other costs involved in attending either​ event, what is your opportunity cost of attending the Hives​ concert?

Answer 1

The opportunity cost of attending the Hives concert is $4040

Explanation:

To calculate the opportunity cost we have to determine the benefit that we would forgo by attending the hives concert. Since I don't occur no additional fee to attend the hives concert, the opportunity cost is the forgone benefit of attending the Colbert concert.

As we value attending the Colbert concert at $7070 but we have to pay only $2525 our net benefit will be

$\ 8080 - \ 4040 = \ 4040$

Therefore, the opportunity cost is $4545 for attending the hives concert.