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, as well as entertainment expenses. The opportunity cost of attending college for this student for four years is
A) $80,000.
B) $100,000.
C) $124,000.
D) $180,000.

Question

Quizplus · Accepted Answer

The total cost of attending college for four years is:

$20,000/year tuition cost + $5,000/year room and board cost + $1,000/year books/entertainment cost = $26,000/year

$26,000/year x 4 years = $104,000

The opportunity cost of not attending college is:

$25,000/year job salary - $5,000/year room and board cost - $1,000/year books/entertainment cost = $19,000/year

$19,000/year x 4 years = $76,000

Therefore, the opportunity cost of attending college for four years is:

$104,000 - $76,000 = $28,000/year

$28,000/year x 4 years = $112,000

Therefore, the best choice is B, with an opportunity cost of $100,000.

Assume That a Student Attends a Four-Year College with Tuition