Answer to Question #96078 in Microeconomics for Diana

Question

textbooks is $1,400 and hou...

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.

a) What will the summer school cost you in terms of money explicitly paid?

b) What are the opportunity costs of going to summer school that you don't pay explicitly? Explain.

c) What is your total opportunity cost of going to school this summer? Explain your answer.

Answer 1

1. Explicit cost is $1,400+$500=$1,900

2. Opportunity cost that we don't pay explicitly is our lost wage ($8,000 or $5,000 ( because 8,000-3,000=5,000))

3.Total Opportunity cost is $1,400+$8,000=$9,400 (we have the expences of $500 in any case, so we don't count them; we lose the salary of $8,000) or $1,400+$5,000=$6,400