Consider the following dialogue between Kyoko, a student in an introductory econ

Question

Consider the following dialogue between Kyoko, a student in an introductory economics class, and Kyoko's teaching assistant, Musashi. KYOKO: Hi, Musashi. This is my first economics course, and many of the concepts discussed in class are really confusing. Today the professor explained that the true cost of going to college includes both the tuition I pay as well as something called the "opportunity cost" of going to college. I don't understand. I pay $49,000 per year in tuition. The tuition is what I pay to the school, so it seems like that should be my tru cost! MUSASHI: Hi, Kyoko. Many concepts in economics can be confusing at first. Let's talk it through. Economists think of costs a bit differently than just the dollar amount that you pay. To an economist, the true cost of college includes the total value of what you give up in order to acquire your college education. In other words, not only did you give up the tuition money that you paid, but by attending college, you gave up opportunities to do other things with your time as well. This is where the idea of opportunit cost comes from. The opportunity cost of your decision to go to college is the value of the next best alternative that you gave up. Suppose that your next bes alternative to college is to work as a cashier. By not going to college, and taking this job, you could earn $28,000 per year. Then your opportunity cost of college is S and your total cost of a year of college is KYOKO: I think I get it now. So when I take into account the opportunity cost of college, the true cost is actually than just the tuition. MUSASHI: Correct. Thinking about costs in this way will help you make more rational decisions in your everyday life. Now tell me, how can you KYOKO: 1 chose to go to college because, for me, the value of a year in college

Explanation / Answer

Opportunity Cost of college is $28,000 per year. This is the money that could have earned by working as a cashier.

Thus the total Cost of a year in college is 28000+49000 = $77,000. Thus the total cost is the sum of both the what you actually pay and your opportunity cost.

Thus the true cost is actually more than just the tuition.

You still choose to go to college because for you the value of a year in college is more than $77,000.

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