Question

Suppose your expenses for this semester are: Tuition: $13,000 Room and board: $7,000 Books and other educational supplies: $2,000. During the semester, you can only work part-time and earn $5,000 instead of your full-time salary of $15,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college? KID a) $25,000 (b) $22,000 c) $15.000 d) $32,000 accounting Information | Boundless Business - Lumen Learning * . W XR0 =09

Answer 1

Answer -

a) $25000

Opportunity cost is the profit lost when one alternative is selected over another alternative.

In this case, the another alternative is the full-time employment and other expenses for the term when the alternative chosen is to be go to college.

In this case, room and board expenses remain the same whether go to college or working full time, therefore it is not considered.

So,

Opportunity cost = Full-time salary + Tuition expense + Books and other educational supplies expense - part-time salary earned

Opportunity cost = $15000 + $13000 + $2000 - $5000

Opportunity cost = $25000

Note: The part-time amount earned while go to college is subtracted as it would be compensated be during full time employment.