Question

In 2016, David Hay started his own business, Hays Gardening and Landscapes. David was previously an employer of another business/

a) What was the opportunity costs for David when he started his business?

A. Cost of marketing to attract customers.

B. Loss of earnings from employment

C. Payment of taxes on profits

D. Risk of business failure

ANSWER:

b) Explain why this answer is correct?

Answer 1

B. Loss of earnings from employment

Step-by-step explanation:

David's opportunity cost in this scenario would be the loss of earnings from employment. This is because is no longer employed, meaning that he no longer makes money from his employment due to him "choosing" to quit and start his own business. Therefore, that is the cost of him choosing another opportunity. The financial costs of marketing, taxes, and risk of business failure are all costs he may or may not incur from the chosen opportunity but are not the same as "opportunity costs" since they are costs that need to be met in order to continue this opportunity and not something that was given up in order to choose this opportunity.