Mr. Sweet opened a candy store. He rented a building for $30,000 a year. During the first year of operation, Sweet paid $40,000 to his employees, $10,000 for utilities, and $20,000 for goods he bought from other firms. His total revenue was $135,000. Sweet's best alternative to running this candy store is to work for Wal-Mart as a sales associate for $15,000 a year. What is Sweet's total opportunity cost?
A) $15,000
B) $100,000
C) $135,000
D) $115,000

Question

Quizplus · Accepted Answer

Sweet's total opportunity cost includes the explicit costs ($30,000 rent + $40,000 wages + $10,000 utilities + $20,000 goods) and the implicit cost of not working at Wal-Mart ($15,000). This totals to $115,000.

Mr Sweet Opened a Candy Store