Final answer:
The correct answer is a) Opportunity cost, which refers to the benefits one could have received by taking an alternative action. Opportunity costs are pivotal in decision-making as they represent potential gains from alternatives forgone when a choice is made to pursue a certain action.
Step-by-step explanation:
Using your personal savings to invest in your business is considered to have an opportunity cost because you are giving up the use of these funds for other investments or uses, such as a vacation or paying off a debt. Opportunity cost represents the potential benefits that an individual, investor, or business misses out on when choosing one alternative over another. Unlike sunk costs, which have already been incurred and cannot be recovered, opportunity costs represent the potential benefits that could have been gained by choosing a different option. Sunk costs should be ignored in decision-making since they have already been spent and cannot be changed. Instead, focus should be placed on variable costs and opportunity costs, which can still influence and inform future business decisions. In the case of using personal savings for business investment, the opportunity cost might include interest that could have been earned if the money was kept in a savings account or the enjoyment from using the money for a personal expense.