Question

Suppose your expenses for this term are as follows: tuition: $10,000, room and board: $6,000, books and other educational supplies: $1,000. further, during the term, you can only work part-time and earn $8,000 instead of your full-time salary of $20,000. what is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?

Answer 1

Opportunity cost is the loss due to forgoing one opportunity to select another one alternative.

In this case, the forgone alternative is the full-time employment and other expenses for the term when the alternative chosen is to be in school. In this case, room and board expenses remain the same whether in school or working full time and thus not considered. The part-time amount earned while at school is subtracted as it would be compensated be during full time employment.

Therefore;
Opportunity cost = $20,000+$10,000+$1,000-$8,000 = $23,000

Answer 2

The opportunity cost of going to college this term is $20,000

Opportunity cost is the cost of the next best option a decision maker forsakes when he/she chooses one option over other options.

• The opportunity cost of attending college is the full-time salary that would be forgone. This is $20,000

• The cost of the room, board, books and other educational supplies are the explicit cost

The explicit cost are the actual costs incurred when the student attends college.

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