Task 1 Lets assume you have won a free ticket to see a Taylo

Task 1 Let\'s assume you have won a free ticket to see a Taylor Swift concert (assume the ticket has no resale value). Ariana Grande has a concert the same night, and this represents your next-best alternative activity. Tickets to the Ariana Grande cost $80, and on any particular day, you would be willing to pay up to $100 to see her concert. Also assume there are no additional costs of seeing either show. Based on the information here, what is the opportunity cost of seeing Taylor Swift?

Solution

Opportunity cost is the next-best benefit foregone because of choosing the other alternative. Here the benefit of seeing A.G’s concert is the excess of willingness to pay over its ticket cost. Such benefit is lost because of not attending the concert; and it becomes the opportunity of choosing the other alternative, T.S’s concert.

Opportunity cost = Willingness to pay – Ticket cost

                             = $100 - $80

                             = $20 (Answer)