You won a free ticket to see Coldplay in concert. Unfortunately, the award is no

Question

You won a free ticket to see Coldplay in concert. Unfortunately, the award is non-transferable and has no resale value. U2 is performing on the same night, with ticketscosting $40, and is your next best alternative activity. On any given day, you wouldbe willing to pay up to $50 to see U2. Assume there are no other costs of seeing eitherperformer.

(a) Had you not won tickets for Coldplay, you would have been willing to pay $20

for the Coldplay concert tickets. Should you use the Colplay tickets you won or

should you discard them and go to the U2 concert?

Explanation / Answer

Opportunity cost of Coldplay concert = $50 - $40 = $10

And if you had not won the tickets for Coldplay, you would have been willing to pay $20

It means if you choose to go for Coldply concert, you will get a benefit of $20 and give up a benefit of $10. Therefore, you should go for Coldply concert

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