Scenario 8.1: Ana used to work for an advertising agency where she earned a yearly salary of $60,000. She got tired of working for another company and therefore opened her own advertising company. Ana now pays her designer $40,000 per year and spends $25,000 for rent and utilities. She earns $120,000 in annual revenue.
-Refer to Scenario 8.1.Ana's opportunity cost of running her own business is

Question

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Ana's opportunity cost is the amount of money she could have earned if she had continued working for the advertising agency instead of starting her own business. Since she used to earn $60,000 and now earns $120,000 but also incurs expenses of $40,000 for salary and $25,000 for rent and utilities, her opportunity cost is $60,000 (her previous salary) minus $40,000 (designer's salary) minus $25,000 (rent and utilities) which equals $-5,000. Therefore, Ana's opportunity cost of running her own business is $60,000.