Scenario 14.1 A worker in Firm A earns an income of $5,000 per month.He has been offered a job in Firm B where he will be paid a salary of $7,000 per month.
-Refer to Scenario 14.1.If the worker joins Firm B,his opportunity cost is:
A)$7,000.
B)$5,000.
C)$2,000.
D)more than $5,000 but less than $7,000.
E)less than $2,000.

Question

Quizplus · Accepted Answer

Opportunity cost is the value of the next best alternative that is foregone. In this case, the worker's opportunity cost is the income he would have earned in Firm A, which is $5,000 per month. Therefore, joining Firm B would mean giving up $5,000 per month, making the opportunity cost $5,000.