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