Question

Paul is considering attending a concert. He estimates the ticket price will be $99, and the cost of driving to the concert and parking will total an additional $23. In order to attend the concert, Paul will have to take time off from his part-time job. He estimates that he will lose 4 hours at work, at a wage of $11.49 per hour. What is Paul's opportunity cost of attending the concert? Enter a number rounded to two decimal places

Answer 1

If Paul attends the concert then he will have to spent $99 on ticket and $23 on driving and parking.

So,

Total explicit cost = Ticket cost + Driving and parking cost

Total explicit cost = $99 + $23 = $122

The total explicit cost is $122.

Moreover, by attending the concert Paul would not be able to work at his part-time job for 4 hours and will lose wage of $11.49 per hour.

Implicit cost = Hours not worked * Wage per hour

Implicit cost = 4 * $11.49 = $45.96

The total implicit cost is $45.96

Calculate the opportunity cost -

Opportunity cost = Total explicit cost + Total implicit cost = $122 + $45.96 = $167.96

Thus,

The Paul's opportunity cost of attending the concert is $167.96