Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of $125,000 (including all benefits)per year. After much consideration, you turn down the offer to start your own accounting firm. You pay yourself $75,000 (including all benefits)a year. Which of the following represents the implicit opportunity cost of your time?

Question

Quizplus · Accepted Answer

The implicit opportunity cost of your time is the amount you could have earned if you had taken the alternative option, which is the salary of $125,000 at the reputable accounting firm. Since you chose to pay yourself $75,000 by starting your own firm, the difference between the two amounts is the opportunity cost, which is $50,000. Therefore, the correct answer is B.

Suppose You Have Recently Graduated and Have Been Offered a Salary