Question

Allison will graduate from high school next June. She has ranked her three possible post-graduation plans in the following order: (1) work for two years at a consulting job in her hometown paying $20,000 per year, (2) attend a local community college for two years, spending $5,000 per year on tuition and expenses, and (3) travel around the world tutoring a rock star’s child for pay of $5,000 per year. What is the opportunity cost of her choice?

Answer 1

Answer:

tutoring opportunity cost: 20,000 consulting job

consulting job opportunity cost: 5,000 + travel from tutoring

collegue: 20,000 consulting job

Explanation:

opportunity cost: cost of the best rejected project, proposal or income

income from work as a consulting job: 20,000

income from tutoring: 5,000 ( externality of travel around the world)

collegue cost of 5,000

The tutorng has an externality of travel around the world. We can measure how much Allison values that chances but it is something she will consider when picking her plan.