If Michelle used $1000 from her savings account,which was paying 6% interest annually,to invest in her brother's new sporting-goods store,the opportunity cost of her investment on an annual basis would be
A)$60.
B)$1000.
C)$1060.
D)her share of the store's profits.
E)the dividend paid to her by her brother.

Question

Quizplus · Accepted Answer

The opportunity cost of an investment is the return that could have been earned if the money had been invested elsewhere. In this case, Michelle's savings account was paying 6% interest annually, so the opportunity cost of investing in her brother's store would be the amount of interest that she would have earned on the $1000 in her savings account, which is 6% of $1000 = $60 annually. Therefore, the correct answer is A) $60.

If Michelle Used $1000 from Her Savings Account,which Was Paying