Well nothing to do with the economics but a lot to do with the economists. An interesting one anyways….
Here is the gist as given by Alex Tabarrok on Marginal Revolutions:
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. Based on this information, what is the opportunity cost of seeing Eric Clapton?
(a) $0, (b) $10, (c) $40, or (d) $50.
I have a hard time believing that this is possible but 78 percent of the economists
gave the wrong answer! This is not a hard question. There is no trick. Opportunity cost is central to economics, the people asked were among the best economists in the world, a large majority of them have taught intro econ and yet the correct answer was the least popular.
You can read the whole study here and a related NY Times article here
The answer obviously is $10.
The difference in the “perceived value” of the Dylan Concert ($50) and the actual cost of the ticket ($40).
If I try to explain this in simple terms, I would get the ticket at $40 anyways when I am ready to dole out $50 so I am losing out on the $10 (virtual) profit that I could have “enjoyed” by going to the Dylan concert instead of the Eric Clapton one.
Disclaimers – I may not be as good as Michael in explaining complex Economics in a simple way and personally though, I prefer Eric Clapton – but I do not have the “free” ticket.
I got the answer right, and before you think that I am posting this just to boast about it, let me say a modest “NO”
Now if you got the answer wrong AND you prize your “Economics degree”, or consider “economics” to be your “cuppa tea”, or just want to rant out; read this counter post on the same Marginal Revolutions. And if I have not confused you enough, go to the comments section of the same post.
I do not agree with the counter Post simply because I think the Net v/s Gross argument does not hold true in this case. The problem clearly states that “ there are no other costs” thus I think the debate is nullified. If this is the “LAST” Dylan concert on the Earth and your “perceived value” is still $50 then the $50 opportunity cost is true, but else not.
BTW – People named Amit are generally smart – You see this Amit got it right as well.
My sixth sense tells me that I need to turn off the comments on this one, but then wasn’t it I who begged for them in the first place.