Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. The opportunity cost of attending State College is:

Question

Quizplus · Accepted Answer

The opportunity cost of attending State College is the net benefit Larry foregoes from the next best alternative, which is Elite U. The net benefit of Elite U is $60,000 (value) - $50,000 (cost) = $10,000. The net benefit of State College is $40,000 (value) - $20,000 (net cost after scholarship) = $20,000. The opportunity cost is the difference in net benefits: $20,000 (State College) - $10,000 (Elite U) = $10,000.

Larry Was Accepted at Three Different Graduate Schools, and Must