John has decided to start his own lawn-mowing business.To purchase the mowers and the trailer to transport the mowers,John withdrew $1,000 from his savings account,which was earning 3% interest,and borrowed an additional $2,000 from the bank at an interest rate of 7%.What is John's annual opportunity cost of the financial capital that has been invested in the business?

Question

Quizplus · Accepted Answer

John's opportunity cost includes the interest he could have earned on the $1,000 he withdrew from his savings account and the interest he has to pay on the $2,000 loan from the bank. 
Interest earned on $1,000 at 3% = $30 
Interest paid on $2,000 at 7% = $140 
Total opportunity cost = $30 + $140 = $170 per year.

John Has Decided to Start His Own Lawn-Mowing Business