opportunıty costs

Question

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 most attractive alternative. Tickets to see Dylan cost $40, but you are willing to pay up to $50 to see him. Assume there are no other costs to see either performer.

Based on this information, what is the opportunity cost of seeing Eric Clapton? And I understand the question but the answer is 10. how is it possible? I think it must be 40. please please explain in detail!!!

Answer 1

I can see how this one would bother you. It's not as black & white as many opportunity cost problems can be because opportunity cost and value can be defined in various ways. Many people (economists included) have even suggested that each of the answers can be considered correct due to the ambiguity and one's own definition of opportunity cost.

However, here's why the textbooks consider the answer 10. Since you are attending Eric Clapton, the opportunity cost is the value of your next best alternative (i.e. the value of the Bob Dylan concert to you). The text suggests the value of his concert is the net benefit...or difference between what he would pay and what he did pay ($10 difference)...much like a consumer surplus. I personally don't agree with it. But that's what the author of the text would suggest