# Calculate the opportunity cost of an increase in the number of hours spent studying in order to...

## Question:

Total Hours Hours Studying GPA Hours Working Income
60 30 2.0 30 $150 60 10 1.0 50$250
60 0 0.0 60 $300 a. Calculate the opportunity cost of an increase in the number of hours spent studying in order to earn a 3.0 grade point average (GPA) rather than a 2.0 GPA. (Assume linear relationships.) b. Is the opportunity cost the same for a move from a 0.0 GPA to a 1.0 GPA as it is for a move from a 1.0 GPA to a 2.0 GPA? c. What is the opportunity cost of an increase in income from$ 100 to $150? ## Opportunity cost: The opportunity cost measures the value of making a choice in terms of another choice that can not be made. In other words, the opportunity cost gives the amount of sacrifices one has to make in terms of other alternative tasks to accommodate or perform a particular task. For example, in the evening from 6-9 pm, if I do my homework for 3 hours, it also means that I am sacrificing the playing pleasure with my brother for 3 hours. Therefore, the opportunity cost of doing homework for 3 hours is equal to 3 hours playing time with brother. ## Answer and Explanation: 1 a. To increase GPA from 1.0 to 2.0 a student needs to increase studying time by 20 hours (from 10 hours to 30 hours), but to do this, he/she has to give up 20 hours of working (from 50 hours to 30 hours) and also sacrifice$100 (250-150) earning.

Therefore, the opportunity cost of studying (20 hours) more to get 1.0 unit higher GPA, i.e., from 1.0 to 2.0 GPA is = $100 earning. Assuming linear relationship, the opportunity cost of studying more (20) hours to earn a 3.0 GPA rather than 2.0 GPA is =$100 earning, i.e., further $100 loss in earning due to giving up 20 more hours of work. Thus, to get 3.0 GPA the student has to study 50 hours and can work only for 10 hours and earn only$50.

b. The opportunity cost of studying more to earn a GPA 1.0 rather than 0.0 is = $50 earning. But, the opportunity cost of studying more to earn a GPA 2.0 rather than 1.0 is =$100 earning.

Therefore, the opportunity cost for a move from a 0.0 GPA to a 1.0 GPA is not the same as it is for a move from a 1.0 GPA to a 2.0 GPA.

c. What is the opportunity cost of an increase in income from $100 to$ 150?

To increase income from $100 to$150, one has to work 10 hours more, that means studying 10 hours less and a reduction in GPA by 0.5 unit (20 hours studying leads to increase in GPA by 1.0 unit). Earning $100 requires 20 hours of working and that means only 40 hours (=60-20 hours) of studying and earning 2.5 GPA. Thus, the opportunity cost of an increase in income from$100 to \$150 is = 0.5 GPA.