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