After graduating from high school, Maria chose to go to college, while Omar chose to work full- time. Which of the following best describes the opportunity costs for these decisions? aMaria’s opportunity cost includes the salary she could have earned if she had gone to work. bMaria’s opportunity cost is her living expenses while attending college. cOmar’s opportunity cost is the salary he will earn from working. dOmar’s opportunity cost is the tuition and expenses he would have paid for college. eOmar’s opportunity cost is definitely greater than Maria’s.
Question
After graduating from high school, Maria chose to go to college, while Omar chose to work full- time. Which of the following best describes the opportunity costs for these decisions? aMaria’s opportunity cost includes the salary she could have earned if she had gone to work. bMaria’s opportunity cost is her living expenses while attending college. cOmar’s opportunity cost is the salary he will earn from working. dOmar’s opportunity cost is the tuition and expenses he would have paid for college. eOmar’s opportunity cost is definitely greater than Maria’s.
Solution
The concept of opportunity cost refers to the potential benefits an individual, investor, or business misses out on when choosing one alternative over another. In this context, it's about what Maria and Omar are potentially missing out on due to their decisions.
a) Maria’s opportunity cost includes the salary she could have earned if she had gone to work. This statement is correct. If Maria had chosen to work instead of going to college, she could have earned a salary. Therefore, this salary is her opportunity cost for deciding to go to college.
b) Maria’s opportunity cost is her living expenses while attending college. This statement is incorrect. Her living expenses are a cost of her decision to go to college, not an opportunity cost. The opportunity cost would be what she is missing out on by choosing to go to college, not the costs associated with attending college.
c) Omar’s opportunity cost is the salary he will earn from working. This statement is incorrect. The salary Omar earns from working is a benefit of his decision, not an opportunity cost. His opportunity cost would be what he is missing out on by choosing to work instead of going to college.
d) Omar’s opportunity cost is the tuition and expenses he would have paid for college. This statement is incorrect. The tuition and expenses are a cost of attending college, not an opportunity cost. Omar's opportunity cost for choosing to work would be the benefits he could have received from attending college, such as gaining a higher education.
e) Omar’s opportunity cost is definitely greater than Maria’s. This statement is incorrect. It's not possible to definitively say whose opportunity cost is greater without more information. The opportunity cost depends on the value that each individual places on the benefits they are missing out on.
So, the best answer is a) Maria’s opportunity cost includes the salary she could have earned if she had gone to work.
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