Question

When you decided to start your consulting company, you were previously earning $ 50,000/year working forthe large private consulting company Accenture. When you started the business it cost $ 100,000 to rent anoffice building, purchase computers, furniture and other office equipment. What was your opportunity costof opening your own consulting company

Answer 1

Opportunity costs are the extra costs or benefits lost associated to choosing one activity or investment over another alternative. In this case, the opportunity cost will equal the $50,000 salary that is not earned anymore and the amount of interest that you could earn by investing the $100,000 in another project.