If Michelle used $1000 from her savings account, which was paying 6 percent interest annually, to invest in her brother's new sporting- goods store, the opportunity cost of her investment on an annual basis would be
A) her share of the store's profits.
B) $60.
C) $1060.
D) $1000.
E) the dividend paid to her by her brother.

Question

Quizplus · Accepted Answer

The opportunity cost of Michelle's investment is the earnings she would have received from her savings account if she had not invested in her brother's store. Therefore, the annual opportunity cost is 6 percent of $1000, which is $60 (B). The other options (A, C, D, E) do not accurately reflect the concept of opportunity cost.

If Michelle Used $1000 from Her Savings Account, Which Was