Question

Consider Mandy’s decision to go to college. If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board. Mandy’s cost of going to college is

A. $32,000.
B. $50,000.
C. $42,000.
D. $58,000.

Answer 1

Mandy’s cost of going to college is calculated by adding the direct costs of tuition, room and board, and books to the opportunity cost of forgone earnings, and then subtracting any non-college-related living expenses. The total cost is $42,000, which makes the answer option C.

Step-by-step explanation:

The question asks to calculate Mandy’s cost of going to college considering both the direct costs and the opportunity costs. The direct costs for going to college include $20,000 on tuition, $10,000 on room and board, and $2,000 on books. However, we must also consider the opportunity costs - the income she foregoes by not working. If Mandy does not attend college, she would earn $18,000 from working in a store. This income is an opportunity cost when she decides to go to college because she must forgo it. Additionally, while the room and board cost is $10,000 if she goes to college, she would spend $8,000 on room and board regardless of attending college, which is not an additional cost attributable to the college decision. To calculate the total cost of going to college, we sum the direct costs and subtract the common expenses she would incur anyway, then we add the opportunity cost of not working.

Mandy's cost of going to college is therefore $20,000 (tuition) + $10,000 (room and board) + $2,000 (books) + $18,000 (forgone earnings) - $8,000 (room and board if not in college), which equals $42,000. Thus, the correct answer is C. $42,000.

Answer 2

The correct answer is $42,000

Step-by-step explanation:

Opportunity cost calculation.

If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books.

If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board

The formula is : (spend on tuition+ (spend of room and board, if she goes - spend of room and board, if she doesn´t go) + spend on books) + (the cost that she will receive, if she decides to not go).

($20,000 + ($10,000-$8,000) + $2,000) + ($18,000 if she goes, she won´t receive "opportunity cost")

=$20,000 + $2,000 + $2,000 + ($18,000)

=$24,000 + $18,000

=$42,000

Mandy’s cost of going to college is $42,000