Question

Refer to Scenario 13-13. Christine used $5,000 from her personal savings account to buy pottery tools for her business. The savings account paid 1% annual interest. What is Christine's annual opportunity cost of the financial capital that she invested in her business

Answer 1

Christine's annual opportunity cost of the financial capital that she invested in her business is $50

Step-by-step explanation:

Opportunity costs are all those losses which are faced for choosing an alternative like loss of interest income in case of investment in the business.

In this question, the opportunity cost for Christine is the loss of interest income from the investment in the saving account in case of investment in the business.

Investment = $5,000

Interest Income = 1% of Investment = $5,000 x 1% = $50

Opportunity cost is $50.