Consider mandy’s decision to go to college. if she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. if she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board. mandy’s cost of going to college is
a. $32,000.
b. $50,000.
c. $42,000.
d. $58,000.

The correct answer is $42,000

Explanation:

Opportunity cost calculation.

If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books.

If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board

The formula is : (spend on tuition+ (spend of room and board, if she goes - spend of room and board, if she doesn´t go) + spend on books) + (the cost that she will receive, if she decides to not go).

($20,000 + ($10,000-$8,000) + $2,000) + ($18,000 if she goes, she won´t receive "opportunity cost")  

=$20,000 + $2,000 + $2,000 + ($18,000)

=$24,000 + $18,000

=$42,000

Mandy’s cost of going to college is $42,000

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