Larry Was Accepted at Three Different Graduate Schools, and Must

question 82

Multiple Choice

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 has decided to go to Elite U. Assuming that all of the values described are correct, for Larry to decide on Elite U, he must have:

• A) calculated his surplus from each choice and picked the one with the highest surplus.
• B) underestimated the benefits of attending No Name.
• C) miscalculated the surplus of attending Elite U.
• D) determined the opportunity cost of each choice and picked the one with the lowest opportunity cost.