Elina is contemplating doing a degree.If she does she will incur university fees of $20,000 in her first year and have to spend $5,000 on textbooks and university supplies, expenses that she would not have otherwise incurred.To help pay for these fees Elina will have to cash out a term deposit of $20,000 from which she earned interest of 10 per cent per annum.What is the opportunity cost of Elina attending university for a year?
A)$20,000
B)$27,000
C)$25,000
D)$22,000
E)$7,000

Question

Quizplus · Accepted Answer

The opportunity cost includes the explicit costs of $20,000 for university fees and $5,000 for textbooks and supplies, plus the implicit cost of the lost interest from the term deposit, which is $2,000 (10% of $20,000). Therefore, the total opportunity cost is $27,000.

Elina Is Contemplating Doing a Degree