Question

Like a good economist, you calculated the opportunity cost of getting your college degree. Suppose that at your university, you will pay $10,000 each year for tuition, $2,500 each year for textbooks, and $12,000 per year for room and board. Before you left for college, your boss at your high-school job offered you a job paying $20,000 per year.
Assume that if you decided not to go to college, your parents would not let you live at home.
What is your opportunity cost for four years of college? $_______

Answer 1

Answer:

$130,000

Explanation:

Calculation for the opportunity cost for four years of college

The first step is to calculate for the cost of education per year

Using this formula

Cost of education per year =Tuition+Text book +Room and board

Let plug in the formula

Cost of education per year =$10,000+$2,500+$12,000

=$24,500

Second step is to calculate the return in a situation were we decided not to go to college

$20,000-$12,000=$8,000

The last step is to calculate for the opportunity cost for 4 years of college:

Using this formula

Opportunity cost =Cost of education per year+ Return * Numbers of year

Where,

Cost of education per year=$24,500

Return =$8,000

Numbers of years =4

Let plug in the Formula

Opportunity cost =($24,500+$8,000)*4

Opportunity cost =$32,500*4

Opportunity cost =$130,000

Therefore the opportunity cost for four years of college will be $130,000