INSTRUCTOR DISCUSSION NOTES:
How Much Does it Really Cost to Go to School in Hong Kong?

1. Why would families willingly pay up to US$1 million to have their child attend a particular school? Use economic reasoning in your answer.

The benefits of attending that school must be at least that high for it to be an economically rational decision.

2. If you were to purchase a debenture like the one described in the article to help your student gain admission to a particular school, why must that be considered as part of the total cost of the education?

The cost of the debenture is part of the opportunity cost of the education; that is US$600,000 foregone that could have been spent on other things.

Multiple Choice/True False Questions

1. True/False. The price of a debenture may be considered part of the opportunity cost of attending an international school in Hong Kong.

     ANS. True

2. Purchasing the debenture in the hope of having a positive outcome on the admissions process is an example of
  1. Variable cost
  2. Fixed cost
  3. Sunk cost
  4. External cost
     ANS. c

3. True/False. As demand continues to increase, the cost of the school debenture will continue to increase.

     ANS. True

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