A tricky opportunity cost question (the answer)

  This article is the answer of a tricky opportunity cost question in previous article. Read the previous article first if you have not read yet. What's the opportunity cost of attending the free John Lee concert(instead of buy ticket to see Mary Chan one)? As there are four options (a $0, b $10, c $40, d $50), if you pick the answer randomly, the probability of answer it correctly is 25%. The author let the university students who have studied economy to answer, only 7.4% of them correct. Then he asked the university students who have not studied economy, 17.2% of them correct. But it was still less than by chance! The author concluded that a little knowledge may be more dangerous than innocence. Let's see if you are the majority.

  If you attend the free concert, what you need to give up is Mary Chan concert which costs $40 but is worth $50 in your mind. Therefore what you can potentially "earn" in the Mary Chan concert is what you sacrifice for the free concert. Then the answer is $50(return) - $40(ticket price of Mary Chan concert) = $10. You may argue that you have not bought the Mary Chan concert yet, you pay no money and therefore no "cost" to attend the free concert. The word "cost" may confine our understanding in this situation. The meaning of cost is broader. It is not just the money you need to pay for. Giving up a glorious occasion is also a cost. This question is interesting because it quantifies something not measurable,i.e., seeing the Mary Chan concert is worth $50 in your mind, we never think like that when we buy concert ticket! It helps us to notice there are hidden costs and hidden values in our daily life.

  The question is difficult but is still quite generous by not mentioning the original price of the free ticket. If the question also mentions the price of free ticket, says $20, I will be further confused and my brain will explode. Actually, the original price of the free ticket contributes no meaning on the opportunity cost of attending John Lee free concert and even Mary Chan concert! It has no meanings on both choices!

  What's the meaning behind $10? It helps you to make rational decision. If you think the John Lee free concert is worth more than $10 in your mind, go for the John Lee one. Otherwise, proceed to buy Mary Chan concert ticket.

  I have also learned a lot from this tricky opportunity cost question. May be I talk about this next time.