If the going rate of interest were 8 percent and the expected profit rate were 14 percent,then the opportunity cost of a firm carrying out a $100,000 project for one year with its own funds would be

Question

Quizplus · Accepted Answer

The opportunity cost is the cost of forgoing the next best alternative. In this case, the next best alternative is investing the money at the going rate of interest, which is 8 percent.
Therefore, the opportunity cost of carrying out the project with its own funds would be the interest that could have been earned on the $100,000 for one year, which is:
$100,000 x 0.08 = $8,000
Hence, the correct answer is C) $8,000.

If the Going Rate of Interest Were 8 Percent and the Expected