Question

Consider Alex's decision to go to college. If he goes to college, he will spend $43,123 on tuition, $21,172 on room and board, and $3,452 on books. If he does not go to college, he will earn $79,304 working in a store and spend $21,147 on room and board. What is Alex's full cost of going to college?

Answer 1

Alex's full cost of going to college is $126,204, which includes out-of-pocket expenses totaling $67,747 and the opportunity cost of foregone earnings of $79,304, offset by the cost of room and board that he would have spent anyway ($21,147).

Step-by-step explanation:

The full cost of going to college for Alex includes both the out-of-pocket costs and the opportunity cost of foregone earnings. The out-of-pocket costs are the sum of tuition, room and board, and books which amount to $43,123 + $21,172 + $3,452, totaling $67,747. However, if Alex chooses to work instead of attending college, he would earn $79,304. Therefore, when considering the opportunity cost, the full cost of going to college amounts to the sum of out-of-pocket costs and the earnings he foregoes by not working, which is $67,747 (out-of-pocket costs) + $79,304 (foregone earnings) - $21,147 (room and board he would have paid anyway), resulting in a total of $126,204.