You own a building that has four possible uses: a cafe, a craft store, a hardware store, and a bookstore. The value of the building in each use is $2,000; $3,000; $4,000; and $5,000, respectively. You decide to open a hardware store. The opportunity cost of using this building for a hardware store is
A) $2,000, the value if the building is used as a cafe.
B) $3,000, the value if the building is used as a craft store.
C) $10,000, the sum of the values if the building is used for a cafe, a craft store, or a bookstore.
D) $5,000, the value if you rented the building to someone else to use as a bookstore.

Question

Quizplus · Accepted Answer

The opportunity cost is the value of the next best alternative forgone. In this case, the next best use of the building is as a bookstore, which would bring in $5,000.

You Own a Building That Has Four Possible Uses: a Cafe