For which of the following individuals would the opportunity cost of going to college be highest?
a. a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree
b. a student with average grades who has never held a job
c. a retired 62-year-old man
d. a promising young mathematician who will command a high salary once she earns her college degree
The correct answer and explanation is:
The correct answer is a. a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree.
Explanation:
Opportunity cost refers to the value of the next best alternative that must be sacrificed when a decision is made. In this case, the opportunity cost of going to college will depend on the alternative the individual must give up in order to attend school.
For a famous, highly-paid actor, the opportunity cost of going to college is quite high. This individual is likely already earning a significant income and gaining fame in a career that could be at risk if they take time off to attend school. The actor is giving up not just a high salary but also potential career opportunities, brand deals, and public appearances. These are opportunities that may not be available again once they step away from the entertainment industry, so the cost of going to college in terms of what the actor has to give up is significant.
In comparison:
- A student with average grades who has never held a job faces a lower opportunity cost. This person may not be sacrificing much in terms of income or career prospects by attending college.
- A retired 62-year-old man likely has fewer active career opportunities to sacrifice, especially if he’s already receiving a pension or social security. His opportunity cost is low in terms of lost income.
- A promising young mathematician may have a higher opportunity cost than the average student, but their cost is still lower than that of a highly-paid actor. While they may be missing out on future earnings, they are still in the process of building their career, and the long-term benefits of completing their degree could outweigh the short-term sacrifices.
Therefore, the famous actor has the highest opportunity cost because they are giving up a lucrative career and fame to pursue a degree.