You currently work as a school bus driver. Your salary is $28,000 per year. You are thinking about quitting your job and going back to college. It will take you two years to obtain your college degree. Tuition and other costs of the education will total $24,000. You also intend to keep your car by making the $250 per month payments out of your savings. How much is the opportunity cost of going to college?

Question

Quizplus · Accepted Answer

The opportunity cost is the value of the next best alternative that is forgone. In this case, the next best alternative is continuing to work as a school bus driver instead of going back to college.

If the person continues as a school bus driver, they would earn $28,000 per year for the two years it would take to obtain a college degree. Therefore, the opportunity cost of going to college would be $56,000 ($28,000 x 2 years).

The cost of tuition and other expenses, as well as the car payments, are not opportunity costs because they are expenses that will be incurred regardless of the decision to go to college or not.

You Currently Work as a School Bus Driver