Bud opened a flower shop. He rented a building for $9,000 a year. To buy equipment for the store, he withdrew $10,000 from his savings account, which earned an annual interest rate of 3 percent. During the first year of operation, Bud paid $4,000 for utilities and $12,000 to his suppliers. The store's total annual revenue was $55,000. The market value of the store's equipment at the end of the year was $8,000. If Bud had not started this business, he would have continued to work as an employee at another flower shop for $30,000 a year. What was Bud's opportunity cost of running his business?
A) $57,300
B) $67,000
C) $67,300
D) $27,000

Question

Quizplus · Accepted Answer

Bud's opportunity cost is the amount of money he could have earned if he had not started his own business. In this case, Bud could have earned $30,000 a year working as an employee at another flower shop. Therefore, his opportunity cost is $30,000.

Bud Opened a Flower Shop