Question

Suppose after graduating from college you get a job working at a bank earning $30,000 per year. After two years of working at the bank earning the same salary, you have an opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank. Which of the following should not be included in a calculation of your opportunity cost?A. The cost of tuition and books to attend the graduate program
B. The $30,000 salary that you could have earned if you retained your job at the bank
C. The $45,000 salary that you will be able to earn after having completed your graduate program
D. The value of insurance coverage and other employee benefits you would have received if you retained your job at the bank

Answer 1

Answer:

D. The value of insurance coverage and other employee benefits you would have received if you retained your job at the bank

Explanation:

Opportunity cost is the price you pay for giving up an investment. You can incur this cost by investing your money in another asset or not investing it. Thus, this missed opportunity is the untapped potential of appreciation. In the case of the above question, the opportunity cost of leaving the postgraduate job is only related to the salary that the person earned and not to the amount of insurance coverage and other benefits that bank employment would provide to that person.

From this, we can conclude that the opportunity cost should not include the value of insurance coverage and other employee benefits you would have received if you retained your job at the bank