Suppose your expenses for this term are as follows: tuition: $10 000, room and board: $6000, books and other educational supplies: $1000.Further, during the term, you can only work part-time and earn $8000 instead of your full-time salary of $20 000.What is the opportunity cost of going to university this term, assuming that your room and board expenses would be the same even if you did not go to university?

Question

Quizplus · Accepted Answer

The opportunity cost is the value of the next best alternative that had to be foregone in order to pursue the chosen option. In this case, the next best alternative is working full-time instead of part-time.

The income forgone by working part-time instead of full-time is $20 000 - $8 000 = $12 000.
So the total opportunity cost of going to university this term is:

$12 000 (income forgone) + $10 000 (tuition) + $1000 (books and supplies) = $23 000

Therefore, the best choice is C.

Suppose Your Expenses for This Term Are as Follows: Tuition