Question

Kris is deciding about returning to university. His current salary is $40,000 per year. The cost...

Kris is deciding about returning to university. His current salary is $40,000 per year. The cost of his school tuition will be $5,000 per term with two terms per year. Ignoring the time value of money, what is the opportunity cost for Kris if he returns to university?

Select one:

$40,000

$50,000

$160,000

$200,000

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Answer #1
  • Opportunity Cost is the Cost of second best alternative that has been given up.
  • In the question if Kris returns to University, his cost will be $ 10,000 per year ($ 5000 x 2 terms)
  • Plus, he will not get $ 40,000 per year that he is earning right now.
  • This $ 40,000 will be given up by him and will become Opportunity Cost.
  • Correct Answer = Option #1: $ 40,000
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