Question

Consider Frank’s decision to go to college. If he goes to college, he will spend $21,000 on tuition, $1,800 on books, and $11,000 on room and board. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. What is Frank’s opportunity cost of going to college?
a. $33,800
b. $42,600
c. $49,800
d. $57,000

Answer 1

Answer:

b. $42,600

Explanation:

First, we calculate the total cost of college:

$21000+1800+11000=33800$

Now, we calculate the net income she would receive, if she didn't go to the college:

$16000-7200=8800$

Finally, the opportunity cost of going to college is the result of adding the total cost of college plus the net income that she would receive if she works instead of going to college.

$33800+8800=42600$