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Thinking Like An Economist?

Teaching:

$35,000

Private Sector:

$45,000 (oppty. cost)

  • -

    $10,000

This is the amount that I may pay to teach.

Let us assume that I make $35,000 a year teaching at N.C. State. This is not how much I really make, but we will use this as an illustration. If I were to be offered a job in the private sector with the same benefits for $45,000 and I decided to continue teaching, then the private sector employment becomes my opportunity cost of teaching. The difference between what I am paid for teaching and the private sector job is the net gain or loss from the decision made. In this case, to continue teaching resulted in a net lose of $10,000. In other words, it is costing me $10,000 per year to continue teaching at N.C. State, or I am paying $10,000 per year for the privilege to teach at N.C. State.

This example does not make me look too bright does it? So what gives here?

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