Sunday, February 19, 2006


Pop Quiz

Can you correctly answer this question? 80% of Economists surveyed at the 2005 Allied Social Sciences Association meeting couldn't.

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. 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
(d) $50.

Click here for the answer.

Before you start to grieve for the economics profession, realize that the answers given to the question are almost randomly distributed between the 4 potential answers. IOW: We would have gotten close to the same results for the survey if each subject picked an answer at random. Personaly, I think they might have. What incentive do they have to do otherwise? I think scored would have been a lot higher if we paid the subjects for answering correctly (maybe impressing a grad student with a clipboard might not have been reward enough for them). Incentives matter even in test taking.

Thanks to Crooked Timber for the link.

FWIW, I figured $10. Upon closer examination, as it has been pointed out, by playing around with the notion of consumer surplus the question brings out some ambiguity in the definition of opportunity costs between gross and net benefits.
Good point. Thanks for the link.
Post a Comment

<< Home
CrispAds Blog Ads

Does someone you know deserve flowers?
Web Site Hit Counter
Dell Canada

This page is powered by Blogger. Isn't yours?