Zack quits his job at a consulting firm, which pays $40,000 a year, to enroll in a two-year graduate program. His annual school expenses are $30,000 for tuition, $2,000 for books, and $600 for food. To calculate Zack's opportunity cost of attending the two-year graduate program, consider both the explicit costs (school expenses) and the implicit cost (foregone salary):
- Foregone salary: $40,000 per year
- Tuition: $30,000 per year
- Books: $2,000 per year
- Food: $600 per year
Total annual opportunity cost = $40,000 + $30,000 + $2,000 + $600 = $72,600 Since the program lasts two years, the total opportunity cost for the entire program is: $72,600 × 2 = $145,200 Therefore, Zack's opportunity cost of attending the two-year graduate program is $145,200, which includes both the income he gives up by quitting his job and his direct educational expenses
