The salary forgone by a person who quits a job to start a business is an example of a n) _____.
A)sunk cost
B)opportunity cost
C)depreciable cost
D)outlay cost

Question

Quizplus · Accepted Answer

The salary forgone by a person who quits a job to start a business is an opportunity cost because it represents the value of the best alternative foregone. In this case, the alternative is to continue working and earning a salary, but the person chooses to start a business instead, therefore giving up the opportunity to earn that salary. A sunk cost is a cost that has already been incurred and cannot be recovered, such as a non-refundable deposit. A depreciable cost is a cost that can be claimed as a tax deduction over time, such as equipment or machinery. An outlay cost is a cost that requires a cash outflow, such as paying for raw materials or rent.

The Salary Forgone by a Person Who Quits a Job