This is Embarassing...

Marginal Revolution linked to a study by two economists from Georgia State University. They posed the following problem to some 200 Economists (many with PhDs):

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 am profoundly ashamed to say I got this wrong. The shame! The only good thing is, 78% of the Economists also got it wrong, so I'm in some pretty good company. I too would have got it, you see, but for the deficient instruction I have received from the Pune University.

The answer to the problem is in the Marginal Revolution post.

Posted in Politics and Economics, Education.