Larry was accepted at three different graduate schools, and must choose one. Eli
ID: 1166466 • Letter: L
Question
Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry's opportunity cost of attending Elite U is:
Explanation / Answer
Larry's opportunity cost of attending Elite U is: $20,000. The opportunity cost of an activity is the value of the next-best alternative forgone.
Larry's opportunity cost of attending Elite U is = 40,000 + 10,000 - 30,000 = 20,000
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