(Scenario: Accounting and Economic Profit)Use Scenario: Accounting and Economic Profit.What is the opportunity cost of Wang's $100,000 inheritance being used to start his business? Scenario: Accounting and Economic Profit
Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year,Tommy Wang quit his job,which paid $60,000 per year,and started Wang's Wicker Furniture Store.He rented a showroom for $20,000 for the year,purchased $60,000 in wicker furniture,and incurred costs of $40,000 for sales help and advertising.In his first year,his revenue was $150,000.

Question

Quizplus · Accepted Answer

The opportunity cost of using the $100,000 inheritance to start the business instead of investing it in a mutual fund that earns 5% each year is $5,000 (5% of $100,000).