Question

P 2-10: Verdi Opera or Madonna?

You won a free ticket to see Verdi's Aida opera. The ticket has no resale value, but since you enjoy Verdi operas, you would be willing to pay $30 for the ticket had you not received it for free. Madonna is performing on the same night. There is absolutely nothing else you can do that night other than either attending the Verdi opera or the Madonna concert. Tickets to the Madonna concert cost $160. On any given day, you would be willing to pay up to $200 to see Madonna because you are such a big fan. Assume there are no other costs of seeing either the Verdi opera or Madonna. What is the opportunity cost of attending the Verdi opera?

Answer 1

There are 2 options:

1st - attend Verdi opera concert, cost of which is 0 as free ticket is won

2nd- attend Madonna concert, cost of which is $ 160 ($ 200 are fictitious and $ 160 is actual cost of ticket)

There is absolutely nothing else which can be done on that night other than either attending the Verdi opera or the Madonna concert. Which any 1 concert is to be attended

If Verdi opera concert is attended which means Madonna concert is not attended so the cost of Madonna concert will be saved. Opportunity cost of an alternative is something which is lost by choosing that alternative.

If Verdi opera concert is attended , $ 160 is not spent on the tickets of Madonna concert. In monetary terms there is no opportunity cost of attending the Verdi opera concert. In fact $ 160 will be saved from spending. Though this $ 160 will not be added to income if Verdi opera concert is attended. $ 160 are just saved by attending Verdi opera concert. In theoretical terms if Verdi opera concert is attended, opportunity of attending Madonna concert is lost. The cost of attending Verdi opera concert is losing the opportunity of attending Madonna concert.