David has the following information to evaluate his current salary of $62,000 versus total revenues of $110,000 and expenses of $67,000 from starting a new business. How much is the opportunity cost associated with staying at his current job?

Question

Quizplus · Accepted Answer

To calculate the opportunity cost, we need to determine the potential income if David decides to start his own business.

Potential income = Revenues - Expenses 
Potential income = $110,000 - $67,000 
Potential income = $43,000

The opportunity cost associated with staying at his current job is the difference between this potential income and his current salary:

Opportunity cost = Potential income - Current salary 
Opportunity cost = $43,000 - $62,000 
Opportunity cost = -$19,000

Since the result is negative, it means that David is better off staying at his current job as he would lose money by starting a new business. Therefore, the best choice is B.

David Has the Following Information to Evaluate His Current Salary