Question

Assume that a student attends a four-year college with tuition costs of $20,000 per year, room and board costs of $5,000 per year, and books/entertainment costs of $1,000 per year. If the student did not go to college, she would work at a job that pays $25,000 per year but still face the same room and board and entertainment expenses. The opportunity cost of attending college for this student for four years is:

A. $100,000 B. $124,000 C. $180,000 D. $80,000

Answer 1

Answer:

A. $100,000

Explanation:

Opportunity cost refers to the benefits foregone by making the choice of one alternative over another equally beneficial alternative. The opportunity cost will assist organisations and even individuals to determine which of different alternatives is the best choice of action per time.

Calculate the Opportunity Cost of Attending College for 4 years

The opportunity cost is a representation of the implicit earnings to be incurred, this means we calculate what the student can earn if he/she does not attend college but gets a job as follows

The job pays $25,000 x 4 years = $100,000

The opportunity cost of going to college is to earn $100,000 from working.