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  • Sometimes a new exciting opportunity presents itself, when we are completely happy about

  • our existing life situation.

  • If that happens, we are forced to think about opportunity costs.

  • This is because when we  look at the new opportunity

  • we compare it with our current situation and

  • think about what is at stake if we would go for it.

  • This often happens without us being able to see the full picture.

  • Economists define opportunity cost as the benefit we forego, as we trade-off one alternative

  • to keep another.

  • hoping we make the best choice.

  • Although they are often less obvious and sometimes speculative, opportunity costs can be huge,

  • therefore, learning about them makes sense.

  • Imagine that we are trying to calculate the true cost of going to college.

  • One factor can be tuition, which in our case is 10,000 dollars.

  • Since that's our only cost, you might conclude that the cost of college is 10,000 dollars

  • a year.

  • But to economists, that's not quite right.

  • Because we have to add the money we could have earned by working, instead of attending

  • college.

  • Let's say that by working full-time in a local restaurant, you can earn $20,000 a year

  • .

  • The true costs of going to college are, therefore, $10,000 tuition plus $20,000 in opportunity

  • costs.

  • By studying for a degree, we trade off 30,000 dollars a year.

  • Although, that's only half the story because it also goes the other way around.

  • Assuming we go to college for four years, we trade-off $120,000 for an education that

  • leaves us with empty pockets, many ideas and a degree.

  • However, once we are better educated, we might be able to make $40,000 as managers instead

  • of the $20,000 in service.

  • In such a case, not going to college ends up being much more expensive.

  • Do you understand the concept?

  • Show us!

  • Calculate the opportunity costs of a high school student who drops the idea of earning

  • a degree in medicine, and instead chooses to help in the family business.

  • The cost for tuition and living is $2,000 a month.

  • It takes a total of 6 years to finish university.

  • After obtaining her degree she works in the field of medicine for 34 years earning $10,000

  • a month and spending $3,000 on monthly living expenses.

  • If she is entering the family business she earns $3,500 a month right away for the next

  • 40 years with zero living expenses.

  • What's financially the better choice?

  • Post your calculations in the

  • comments below!

Sometimes a new exciting opportunity presents itself, when we are completely happy about

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A2 opportunity college cost tuition degree family business

Opportunity Cost: The Hidden Cost of Everything

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    Summer posted on 2022/04/03
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