Suppose you are a star basketball player at a major university in your sophomore year. You are sought after by several NBA teams. Which of the following choices best characterizes your opportunity cost if you choose to drop out of college and enter the NBA?
A)The value of your college scholarship that you have given up.
B)The skills that two more years of playing at your college would have given you along with their additional value over the rest of your life, in addition to the educational value of the college degree.
C)The total of explicit costs that have been incurred in the past.
D)The total of implicit costs that have been incurred in the past.

Question

Quizplus · Accepted Answer

The opportunity cost of dropping out of college and entering the NBA would be the skills and knowledge that two more years of playing at the university would have given you, along with their additional value over the rest of your life, in addition to the educational value of the college degree. This represents the lost potential income and benefits that could have been gained had you stayed in college and developed further skills and credentials. The value of the college scholarship that has been given up would be a sunk cost and not an opportunity cost. The total of explicit and implicit costs incurred in the past would also be sunk costs and not opportunity costs. The opportunity cost of dropping out of college and entering the NBA is the value of the skills and education that two more years of playing at college would have provided, along with their additional value over the rest of your life. This is because by choosing to leave college, you are giving up the potential benefits that additional education and playing time may have provided. The value of the college scholarship you have given up is a sunk cost and is not relevant in this scenario. The total of explicit costs and implicit costs that have been incurred in the past are also not relevant to the decision-making process.

Suppose You Are a Star Basketball Player at a Major