Question

Assume your firm has an unused machine that originally cost $75,000, has a book value of $20,000, and a market value of $25,000. Ignoring taxes, what is the opportunity cost of using this machine

Answer 1

$25,000

Step-by-step explanation:

Opportunity costs is based on market value, not historical costs or original costs. So, the opportunity cost of using this machine is $25,000