Consider the following info regarding a person’s decision to go
to college: college tuition is $25,000 per year, room and board is
$15,000 per year and books and materials are $3,000 per year.
Suppose that instead of going to college, this person could have
earns $20,000 working for OCBC, or $15,000
working for Cold Storage. An economist would calculate the cost of
going to college as…
Ok I have 2 solutions. Tell me which is the correct one. The
question is vague because it does not specify when it wants us to
calculate the opportunity cost OR economic cost.
If we need to find JUST the opportunity
cost.
1) Answer is $20,000. Opportunity cost is the net benefit of the
NEXT BEST alternative that needs to be given
up. OCBC is the next best, not Cold
Storage.
2) Economic cost = Money cost + opportunity cost
Money cost = those money SPENT on
education = 25,000+15,000+3,000 = 43,000
Economic cost = 43,000 (money cost) + 20,000 (opportunity cost
of attending college) = 63,000
Which is correct? I will need second opinions. Thanks