Larry was accepted at three different graduate schools, and must choose one. elite u costs $50,000 per year and did not offer larry any financial aid. larry values attending elite u at $60,000 per year. state college costs $30,000 per year, and offered larry an annual $10,000 scholarship. larry values attending state college at $40,000 per year. noname u costs $20,000 per year, and offered larry a full $20,000 annual scholarship. larry values attending noname at $15,000 per year. larry's opportunity cost of attending state noname u is:

$15,000

Explanation:

Given that,

Elite U:

Costs $50,000 per year

Larry values attending Elite U = $60,000 per year

State College:

Costs = $30,000 per year

Offered Larry an annual scholarship = $10,000

Larry values attending State College = $40,000 per year

No Name U:

Costs = $20,000 per year

Offered Larry a full annual scholarship = $20,000

Larry values attending No Name = $15,000 per year

Larry gets economic surplus from:

Elite U = $60,000 - $50,000

           = $10,000

State college = $40,000 + $10,000 - $30,000

                     = $20,000

No Name U = $15,000 + $20,000 - $20,000

                   = $15,000

State college > No Name > Elite U

Therefore, the opportunity cost of attending State college is the value of the next best alternative that is No Name U.

Hence, the opportunity cost is $15,000.

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