Asked by Morghan Graper on May 14, 2024
Verified
You own a building that has four possible uses: a tailor shop, a pharmacy, a sports bar, and an antique mall. The building's value in each use is $4,000; $6,000; $8,000; and $10,000, respectively. You decide to open a sports bar. The opportunity cost of using this building for a sports bar is
A) $4,000, the value if the building is used as a tailor shop.
B) $6,000, the value if the building is used as a pharmacy.
C) $20,000, the sum of the values if the building is used for a tailor shop, a pharmacy, or an antique mall.
D) $10,000, the value if you rented the building to someone else to use as an antique mall.
Opportunity Cost
Opportunity cost represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.
Sports Bar
A bar or tavern that provides a venue for people to watch sporting events, often equipped with multiple large-screen televisions.
- Comprehend the concept of opportunity costs and their impact on decision-making within a business context.
Verified Answer
PS
Preya SutarwallaMay 21, 2024
Final Answer :
D
Explanation :
The opportunity cost is the value of the next best alternative foregone. In this case, the next best use of the building is as an antique mall, which would bring in $10,000, making D the correct answer.
Learning Objectives
- Comprehend the concept of opportunity costs and their impact on decision-making within a business context.
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