Answer to Question #97123 in Macroeconomics for Rajwinder

Question

how would you think of calculating the opportunity cost of a 4 year undergraduate degree? what are the elements of this cost that individuals tend to overlook? ( you may assume that it cost the same to live at home as it does to attend college in nearby city

Answer 1

Alternative cost is the cost of producing a product or service, measured in terms of the lost opportunity to engage in the best available alternative activities that require the same time or the same resources.

Two types of A. s. Are distinguished:

1) A. s., Associated with cash costs;

2) A. p., Associated with lost income.

As the first type A. s. we can name the monetary costs of studying at the university, and A. as a second type. - loss of potential income for the sake of studying at the university. The total amount A. s. in this example, includes the monetary costs of training and lost income.

If it cost the same to live at home as it does to attend college in nearby city, then opportunity costs - this is the income that could have been received for 4 years of work, instead of 4 years of study.

However, in the long run, a good education will certainly pay off