Question

Comment on the statement from an opportunity cost perspective: "The major cost of going to college is the $15,000 per year in tuition." Assume that a person could have earned $30,000 a year if the person did not go to college.

Answer 1

Opportunity cost = $30,000

Step-by-step explanation:

Opportunity cost is the value of the next best alternative sacrificed in favor of a decision. Opportunity cost is also known as implicit cost. It is the value of the sacrificed made to take a course of action.

For example, should the person in question decides to go to college, that would mean him forfeiting the sum of $30,000 which he would have earned had he decide otherwise.

The accounting cost of going to college is amount is $15,000,the cost to be incurred.

While the economic cost would be the sum of the accounting cost plus the opportunity cost

Economic cost = 30,000 + 15,000 = $45,000