Question

Jacinda quit her job as a blackjack dealer where she made​ $42,000 per year to start her own florist business. Her business expenses are​ $14,000 per year on​ rent, $21,000 per year on​ supplies, and​ $9,000 per year on part time help. As for her personal​ expenses, her apartment costs her​ $12,000 per year and her personal bills are an extra​ $6,000 per year. What is​ Jacinda's opportunity cost of running the​ business?

Answer 1

Answer:

Opportunity costs = 42,000 + 14,000 + 21,000 + 9,000 = $86,000

Explanation:

Opportunity cost is the cost of doing the next alternative.

In this case the opportunity cost would be the profits she has forgone and the costs she incurred to run the florist shop. Personal expenses are not included as we assume apartment and bill costs would be payable regardless of any decision.

Opportunity Costs = Next alternative + Costs of being a florist

Opportunity costs = 42,000 + 14,000 + 21,000 + 9,000 = $86,000

If Jacinda were making profits, we would subtract them from the salary that she could have earned.

Hope that helps.