Answer to Question 1
D
Answer to Question 2
a) Jane explicitly pays the cost of tuition and textbooks (1,700 ) and the cost of housing (600 ), so her total explicit costs are 2,300.
b) Jane's opportunity cost is what she gives up (her best alternative forgone) to go to summer school. In this case she forgoes 40 hours per week of her free time, which she values more highly then the income from the best job she could find. To place a dollar value on this time, notice that the value that she places on this time is the amount of money she is willing to accept to give it up: 750 per week. So for the eight weeks, her free time has a value of 750 8 = 6,000. Although she does not pay 6,000 explicitly, she gives up this value of her free time and hence it's an opportunity cost to her.
c) Jane's total opportunity cost includes the cost that she pays explicitly, 2,300, which she has to pay only if she goes to school. Also, as explained in the previous part, Jane is giving up the value of her free time, 6,000. Thus, her full opportunity cost of going to school is 2,300 + 6,000 = 8,300.
d) Jane's marginal benefit of going to summer school is the possibility of getting her degree faster. For instance, if the summer school allows her to graduate one semester earlier, she can start to work and earn income earlier. The additional income and work experience that she gets because of her earlier graduation is what she gains if she decides to go to school in the summer.
e) Jane decides to go to school in the summer if her marginal benefit from this decision, the value of extra income and work experience that she gets if she graduates earlier, is greater than the marginal cost of her summer school, 8,300.
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