Greg, a landscaper, is planning on opening his own landscaping company. He currently earns $40,000 per year working for his uncle but he will need to quit that job. He plans to use $10,000 in savings to pay for the equipment he needs, though even after use he could sell the equipment for what he paid, $10,000. The current interest rate on savings is 5 percent. What is the total opportunity cost incurred by Greg in running his own business?
A) $10,000
B) $40,500
C) $40,000
D) $50,000

Question

Quizplus · Accepted Answer

The opportunity cost includes the $40,000 salary he foregoes and the $500 interest he would have earned on his $10,000 savings (5% of $10,000), totaling $40,500.

Greg, a Landscaper, Is Planning on Opening His Own Landscaping