Question

What is an opportunily cost? Suppose you own a business and spent ( $ 100,000) on materials You observed fhat the prevañing interest rake is ( 5 % ). You also. noted that if you worked for a c?

Answer 1

An opportunity cost refers to the potential benefit that is lost when making a choice between two or more alternatives. In the context of owning a business, the opportunity cost of spending $100,000 on materials is the return on investment that could have been earned if the money was invested elsewhere, such as in a savings account with a 5% interest rate.

Step-by-step explanation:

An opportunity cost refers to the potential benefit that is lost when making a choice between two or more alternatives. In the context of owning a business, the opportunity cost of spending $100,000 on materials is the return on investment that could have been earned if the money was invested elsewhere, such as in a savings account with a 5% interest rate.

To calculate the opportunity cost, you need to determine the alternative uses of the money and the benefits they would provide. In this case, if the prevailing interest rate is 5%, the opportunity cost would be $5,000 per year ($100,000 x 0.05). This represents the amount of potential income that could have been generated by investing the money instead of spending it on materials.