Question

Like a good economist, you calculated the cost of getting your college degree, including the opportunity cost. Suppose that at your university, you will pay $10,000 each year for tuition, $2,000 each year for textbooks, and $12,000 per year for room and board. Before you left for college, your boss at your high-school job offered you a job paying $25,000 per year.

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

Including the opportunity cost, what is the cost of attending four years of college?

Answer 1

First, calculate the total cost of attending college.

Tuition: $10,000 * 4 = $40,000

Textbooks: $2,000 * 4 = $8,000

Room and board: $12,000 * 4 = $48,000

$40,000 + $8,000 + $48,000 = $96,000.

Next, calculate the opportunity cost. This is the loss of potential gain you could have made upon choosing this alternative. In this case, the amount of money lost by not working for your high school boss for four years.

$25,000 * 4 = $100,000.

Finally, add those together. $96,000 + $100,000 = $196,000.

The cost of attending four years of college, including the opportunity cost, is $196,000.