The opportunity cost of a firm using its own capital is
A) self-ownership depreciation.
B) capital loss.
C) economic depreciation.
D) normal loss.
E) economic loss.

Question

Quizplus · Accepted Answer

The opportunity cost of a firm using its own capital is economic depreciation. This is because the firm could have invested the same amount of capital in another opportunity, such as in the stock market or real estate, and earned a return or capital gain. Therefore, by using its own capital for a certain project, the firm is giving up the potential return it could have earned from investing that capital elsewhere, which is the opportunity cost.

The Opportunity Cost of a Firm Using Its Own Capital