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19 October, 09:55

You plan to go to school this summer. if you do, you won't be able to to take your usual summer job that pays $11,000 for the summer. the cost of tuition is $2000 and textbooks cost $300. You live with your family, which covers your living expenses of $2,000. What is your opportunity cost of going to school this summer?

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  1. 19 October, 13:53
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    Any opportunity cost is that cost which you give up in order to pursue a different thing. In this problem, you give up your $11,000 job to go to school. However you are going to spend $2300 (tuition is $2000 and books are $300) to go to school.

    In short: If you took the job, you would make $11,000. If you go to summer school, you spend $2,300. However, you are in school, and both spending and not making the money. Your opportunity cost is their sum - $13,300, because you gave up the job and are spending money on books and tuition.

    Notice that the living expenses are not mentioned - that is a fixed cost and that change is not included.

    The opportunity cost is $13,300.
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