Suppose you plan to go to school this summer. The cost of tuition and textbooks

Question

Suppose you plan to go to school this summer. The cost of tuition and textbooks is $1,400 and housing, board, and entertainment will cost you $500. If you didn't go to school, you'd live in your parents' house for free, but your other living expenses would be about the same. Also, if you didn't go to school you'd work full time and could earn $8,000. You can still work part time while attending the summer school, but you will earn only $3,000.

How much money will you spend to go to school over the summer?

What is the opportunity cost of going to school over the summer?

Explanation / Answer

a. explicit cost will be =$1,400+$500 = $1,900

Total OC would be the cost you pay explicitly ($1,900) plus the previous OC that you don’t pay explicitly ($5,000). Thus, total OC is $6,900

b.

You trade the opportunity of getting a full time job to a part time job, thus the OC is $8,000- $3,000=$5,000

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