Anson is going to graduate from the Hong Kong Community College. He is deciding whether to accept an offer from a local university to study a degree program. It takes him two years to complete the degree program in full-time mode and the tuition fee of the program is $52,000 per year. Cost of book and other study aids for the degree program is estimated as $6,000 per year.

Owning to the outbreak of COVID-19, his parents are now out of work. As Anson's family live in a private property, he believes he would probably apply for the Non-means-tested Loan Scheme (NLSFT) for his study. The estimated amount of loan received equals to the amount of his tuition fees payable in the academic year. The loan is interest-bearing at 4% per annum chargeable from the commencement of the repayment period for 15 years.

At the same time, Anson receives a full-time job offer of which the monthly income is $17,000. His only reason to study further is the opportunity of earning a higher life-long income and this amount is unknown at the moment.

(Remark: Time value of money, the concept of "present value" and "amortization of loan" should NOT be considered in your analysis.)

1. Define opportunity cost. Base on the above information ONLY, calculate the total opportunity cost for Anson to take the degree program. List the relevant items and show your workings. (10 marks)

2.Imagine that you were Anson's best friend, how could you make use of the concept of 'rational choice' to help Anson to make his decision - whether Anson should study the degree program? Explain and illustrate any TWO possible decisions. (4 marks)

3.Based independently on each given situation below, identify and explain the type of incentives that could affect Anson's decision of studying the degree program. Support your answer with relevant figures and show your workings.

(i) SupposeAnson's elder brother agrees to pay the tuitionfee for Anson on the condition that Anson has to repay the same amount to him one day in the future without interest and all other things held constant. (3 marks)

(ii) Suppose Anson realizes that he needs to spend an extra year to complete the degree program because only a few subjects are eligible for credit transfer and all other things held constant.

(3 marks)