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Calculating opportunity costs

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Total Hours Hours Studying GPA Hours Working Income

60 60 4.0 0 $0.00
60 40 3.0 20 $100.00
60 30 2.0 30 $150.00
60 10 1.0 50 $250.00
60 0 0 60 $300.00

A. Calculate the opportunity cost of an increase in the number of hours spent studying in order to earn a 3.0 GPA rather than a 2.0 GPA.
B. Is the opportunity cost the same for a move from a 0.0 GPA to a 1.0 GPA as it is for a move from a 1.0 GPA to a 2.0 GPA?
C. What is opportunity cost of an increase in income from $100 to $150.00

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Solution Summary

Solution describes calculating opportunity costs between earning GPA and hourly Income.

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Solution :

A. Calculate the opportunity cost of an increase in the number of hours spent studying in order to earn a 3.0 GPA rather than a 2.0 GPA.

For earning one extra GPA (2.0 to 3.0), He will be having 10 hours less available for working.
Change in working income because of move from 2.0 GPA to 3.0 GPA = $(100-150) = -$50
So, ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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