Question

When making your decision to attend college you had to weigh both the short term and long term expected benefits against and short and long term expected costs. That is, you undertook benefit/cost analysis and obviously decided that the benefits outweigh the costs — at least in the long run. When estimating the costs of attending college most people think of tuition, fees, books, room, and board, etc… However, to get a full measure of all the costs of a decision one needs to also consider the opportunity costs. What are some opportunity costs of attending college? What is the opportunity cost of attending college full time? Explain.

Answer 1

Opportunity cost is the cost of the next best alternative foregone. Suppose you decide not to go to college after graduating high school. Then you will most likely look for a job instead. The salary that this job pays will be your opportunity cost of attending college. For example, you have 3 jobs you can choose from- one offers a salary of $25k p.a, another offers $20k p.a and the third offers $30k p.a. Now, if you decide to go to college, you can't take any of these jobs. However, your opportunity cost of going to college will not be the sum of all 3 salaries (25k + 20k + 30k); it will just be $30k. Always keep in mind that opportunity cost is the value of next best alternative, so it will always be value of the highest paying job that you forego if you decide to attend college. Hence, in this example, it will be $30k.

Similarly, opportunity cost of attending college full time will be the highest salary offering full time job that is foregone by going to college.