203HS-349F-1: Introduction to Microeconomics in Global Health
Homework #1
Name: Fairooz Newaz
1. Debbie quits her job, which pays $30,000 a year, to finish her college degree. Her annual
college expenses are $10,000 for tuition, $2,000 for books, and $700 for food. What is
her opportunity cost of attending college for the year? What are the direct costs and the
indirect costs?
Debbie’s total opportunity cost is the total cost of attending the year of college, plus the
amount of income she is losing that year by attending college.
Opportunity cost = Cost of giving up one year’s salary + cost of tuition and books
OC = $30,000 + $10,000 + $2,000
OC = $42,000
The cost of food is not included in the calculation for opportunity cost because Debbie
would have had to buy food regardless of whether she went back to college or not.
The direct costs are tuition and books (i.e. $12,000 - the direct cost of Debbie finishing
one more year of her college degree), and the indirect costs are how much Debbie
would have earned that year if she had stayed at her job ($30,000).
2. Sarah is pregnant and needs to go to the doctor for her antenatal care visits. She works
at the local grocery store making minimum wage $10 per hour. She will have to pay for
the visit ($35) as well as the medicines ($25). It will take her 3 hours to get to the
facility and she has to pay for the bus which will be $5. She cannot go to work for these
three hours. She also buys a snack on the bus for $2. What is her total opportunity cost
of going for one antenatal care visit? What are her direct costs and indirect costs?
Sarah’s total opportunity cost is the total cost of her antenatal care visit, plus the
amount of wages she loses due to not being able to work for those 3 hours.
Opportunity cost = Cost of giving up 3 hours of work + cost of antenatal care visit
OC = $(10x3) + $35 +$25 + $5 + $2
OC = $97
The cost of food is included here as she specifically buys the snack for the bus trip
which she only needs to take for the antenatal care visit.
The direct costs are the cost of the visit, medicine, bus ticket and food ($67), and the
indirect costs are the wages she would have earned if she had worked those 3 hours
instead ($30).
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