Question

Mark is a music teacher at an elementary school and earns $60,000 per year. He spent $5,000 last year getting an advanced certification for working at elementary schools. He is considering quitting his job as a teacher and offering private music lessons. By offering private music lessons, Mark would earn $50,000 per year. What is the opportunity cost for Mark to start offering private lessons?

1 - $60,000
2 - $50,000
3 - $65,000
4 -$55,000
​Which of the following is a proper application of the

Answer 1

The opportunity cost for Mark to start offering private music lessons is calculated by adding his current annual salary as a teacher to the cost of the advanced certification. This results in a total opportunity cost of $65,000, which combines his current salary of $60,000 with the $5,000 spent on the certification.

Step-by-step explanation:

The concept of opportunity cost is essential in economics and business as it represents the potential benefits that an individual or company misses out on when choosing one alternative over another. For Mark, the music teacher considering quitting his job to offer private lessons, the opportunity cost involves factors beyond just the salary difference. Implicit costs, like foregone salary, should also be considered.

The opportunity cost for Mark to start offering private lessons is the salary that he will no longer earn as a teacher, plus any other costs related to the transition. Since he earns $60,000 a year as a teacher, and expects to earn $50,000 from private lessons, the direct salary difference is $10,000. However, considering that he spent $5,000 to get an advanced certification, which contributes to his ability to earn $60,000 as a teacher, the total opportunity cost is $65,000 when the certification cost is added to the lost salary.