Answer to Question #130274 in Microeconomics for Gayathri Prasath

Question

you have an economics exam tomorrow, and you are planning to study tonight your best friend calls to tell you that has an extra ticket to concert tonight that he will give to you for free what is the true cost of attending the concert

Answer 1

In basic economic sense, the term cost refers to the measure of the value of the alternative opportunities forgone when a choice is made. This is the fundamental economic cost known as opportunity cost.

Therefore, the true cost of attending the concert is the study time lost or forgone. The time that was planned for study shall never get compensated. The cost extends to lost prospects of passing the exam measured as the difference between the exam score that could have been obtained had the concert not been attended and the score actually scored after attending the concert. The scores/grade lost by not studying will never get compensated.

The cost extends to lost opportunities, such as prizes, better job opportunities in future, and high income that would have been brought by passing the exam had the concert not been attended.

Thus, the true cost is total of the lost study time, lost prospects of a good grade in the exam, and the foregone future life opportunities caused by exam poor grade due to lost study time.