You have won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is playing that same night and is your next best activity. Tickets to see Dylan cost $40. On any given day, you would be able 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?
Opportunity costs evaluate the cost of making a choice for a service or goods based upon the trade-off involved. Opportunity costs involve not just the actual cost of the service or goods but also the cost of what is given up (the next best alternative is considered and evaluated). It is termed an "opportunity" cost because it considers forgone opportunities.
In the case of the Dylan/Clapton concerts, the costs to be considered are the free tickets to Clapton, which equate to zero cost, and the cost of the Dylan concert. It is stated that typically Bob Dylan concert tickets sell for fifty dollars, but for this particular concert tickets are only forty dollars. In the case of the Bob Dylan tickets the opportunity cost to see Bob Dylan any other night would thus be ten dollars higher. This is calculated by taking the difference between tonight's tickets, forty dollars, and any other Dylan tickets at fifty ...
This solution outlines the opportunity costs of seeing a free Eric Clapton concert compared to a discounted Bob Dylan concert.