Question

. In the lecture notes about higher education, there’s an example showing the net present value of getting a bachelors degree. This includes a box with some text that goes something like this, “Is This Poor Analysis a Result of the Instructors Laziness or His Ignorance? For a fun, in-class exercise, how many problems can you identify with the analysis presented above? There are at least two that I know of, excluding the issues presented below.”

A. For the student in question, there is an important cost of attending college that is not included in the calculations, although it is mentioned in the lecture notes. As a hint, the usual assumption is that a student who finishes in four years is going to school full time and not engaged in other things.

B. The cost of room and board is included as a cost of attending college. Should it be?

C. Oh, yeah, what is the marginal cost of having one more student in a class? Should the analysis of attending college be based on the average cost or the marginal cost of college attendance?

2. Here’s a cheerful bit of news from the Social Security Administration

Answer 1

A. The cost of attending college should be included in the calculations.

It should include all the expenses one incurs on room, boarding, travelling to class and basic food related expenses.

Also, as an opportunity cost one shisho also look at the income foregone bu the student had he worked somewhere else in these 4 years. it is a very important part of analysis.

C.Marginal cost of having one more student in the class should include the cost of notes / handed over to the student.

Rest almost everything is included in the fixed cost, like cost of classroom,teachers, electricity , research labs and other infrastructure which would not vary if one more student is added in the class.

Analysis of attending college should be based on average cost of attendance because we are analysinv the cost of completing a course and not just a class.