Opportunity Cost

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Opportunity Cost

The mathematical formulae of calculating the opportunity cost is;

Opportunity Cost = Cost of Selected Alternative – Cost of Next Best Alternative.

The selected alternative in this case is Woodbury University. The structured fee cost to study at Woodbury University is shown below.

FEES in $             1^st year            2^nd year                   3^rd year                     4^th year 

The total cost of Woodbury University is $ 2200+1200(6)

$ 2200+7200

= $ 9400

The cost of the next best alternative is the salary I would have been getting given I did not attend Woodbury University. As a film salesperson, I would have been making 3010 dollars annually. Given that the Woodbury course takes four years, the assumed net salary would be:

$3010 (4)

= $ 9040

From the data, the opportunity cost is:

9400- $9040

=360

The opportunity cost is 360.