Question

A Nike women’s-only store in California offers women’s running, training and sportswear products and also contains an in-store fitness studio for group and personal fitness training sessions. The store consistently earns profits in excess of $500,000 per year and is located on prime real estate in the center of town. The store owner pays $15,000 per month in rent for the building. A real estate agent approached the owner and informed her that she could add $8,000 per month to her firm’s profits by renting out the portion of her store that she uses as a fitness studio. While the prospect of acquiring this rental income was enticing, the owner believed the use of that space as a fitness studio was an important contributor to her store’s profits.

What is the opportunity cost of continuing to operate the fitness studio within the store?
$______

Answer 1

$8000

Step-by-step explanation:

Opportunity cost or implicit cost is the cost of the next best option forgone when option is chosen over other options

By continuing to operate the fitness studio, the store owner is giving up the opportunity to earn $8000 from renting it. This is the opportunity cost