When SW International declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as SW International's
A) producer surplus.
B) consumer surplus.
C) opportunity cost.
D) social cost.

Question

Quizplus · Accepted Answer

SW International's opportunity cost is $200 million. Opportunity costs capture the value of the best forgone alternative use of the resources employed.

When SW International Declared a Dividend of $20,000,000, Its Market