Desiree currently works as a manager of an electronics store earning an annual salary of $50,000. She noticed an internal job opening for a regional manager that pays $100,000 salary, but an MBA is required for consideration. The cost for a full-time MBA program in two years is $60,000. What is her opportunity cost for attending graduate school, without consideration for time value of money?

Question

Quizplus · Accepted Answer

The opportunity cost is the salary Desiree would have earned if she had not attended graduate school. In this case, she would have earned $50,000 per year for two years, or $100,000 total. In addition, she would have to pay $60,000 for the MBA program. Therefore, her total opportunity cost is $100,000 + $60,000 = $160,000.

Desiree Currently Works as a Manager of an Electronics Store