You started a new business and your twin sister helped you out for free while she turned down a project that would have paid her a total of $200.When calculating the costs involved in starting up the new business,you should
A) not include $200 since you did not have to pay your sister.
B) include $200 as the sunk cost.
C) include $200 as an average weekly cost since this is what your sister might have received.
D) include $200 as the opportunity cost of your sister's labour.
E) not include your sister's labour since she is family.

Question

Quizplus · Accepted Answer

The best choice is to include $200 as the opportunity cost of your sister's labour. Opportunity cost refers to the value of the next best alternative that is forgone when a particular choice is made. In this case, your sister gave up an opportunity to earn $200 by helping you out for free. Hence, the $200 should be included as a cost in the calculation of starting the new business.

You Started a New Business and Your Twin Sister Helped