Suppose Ripco owns the building from which it operates.If _____
A)the firm pays no rent, there is no opportunity cost.
B)the firm does not rent the building to anyone else, there is no opportunity cost.
C)the firm pays rent, there is an opportunity cost.
D)its usage of the building precludes it from renting to anyone else, there is an opportunity cost.
E)the firm can use the building for other things, there is no opportunity cost.

Question

Quizplus · Accepted Answer

Opportunity cost refers to the loss of potential gain from other alternatives when one alternative is chosen. In this case, if Ripco uses the building for its operations and this usage prevents it from renting out the building to someone else, Ripco incurs an opportunity cost equal to the rent it could have earned.

Suppose Ripco Owns the Building from Which It Operates