Answer to Question #84654 in Macroeconomics for Banshri N Patel

Question

Like a good economist, you calculated the opportunity cost of getting your college degree. Suppose that at your university, you will pay $10000 each year for tuition, $2000 each year for textbooks, and $12000 per year for room and board. Before you left for college, your boss at your high-school job offered you a job paying $25000 per year.

Assume that if you decided not to go to college, your parents would not let you live at home.

What is your opportunity cost for four years of college? $

Answer 1

The cost of education per year:

$10,000+$2,000+$12,000=$24,000

The return, if we decided not to go to college:

$25,000-$12,000=$13,000

We lose this return if decide to go to college. And we have to pay for room and board anyway.

The opportunity cost for four years of college:

($24,000+$13,000)*4=$148,000