Question

If Jane attends graduate school, it will take her two years, during which time she will earn no income. She will pay a total of $100,000 for tuition, $20,000 for room and board, and $2,000 for books. If she spends the two years working rather than attending college, she will pay a total of $18,000 for room and board, pay no intuition, and buy no books. Based on this information, Jane's economic cost of attending graduate school would be $175,000 if, over the two years, she could earn a total of:

Answer 1

Answer:

Her economic cost of attending college would be $175,000 if over the two years she could a total of $53,000.

Explanation:

Economic cost can be defined as the total cost of pursuing an endeavor including the opportunity cost. The opportunity cost is the cost of choosing one alternative over the other. The opportunity cost is usually considered by economists to determine the overall loss or profit one gains from picking one choice over the other. An economic cost is a kind of implicit cost that varies from organization to organization depending on different perspectives. In our  case, we need to compare the costs of attending college for two years with the cost of using the same two years working. This can be calculated as shown;

Step 1: Determine Economic cost of attending graduate school

The economic cost for attending college can be expressed as show;

E=T+R+B+O

where;

E=economic cost

T=tuition cost

R=cost for a room and board

B=books cost

O=opportunity cost

In our case;

E=$175,000

T=$100,000

R=$20,000

B=$2,000

O=unknown, to be determined

Replacing;

175,000=100,000+20,000+2,000+O

175,000=122,000+O

O=(175,000-122,000)=$53,000

The opportunity cost for attending college=$53,000. This means that she will sacrifice $53,000 if she decides to attend college.

Her economic cost of attending college would be $175,000 if over the two years she could a total of $53,000.