Question

You own a building that has four possible uses: a cafe, a craft store, a hardware store, and a bookstore. The value of the building in each use is $2,000; $3,000; $4,000; and $5,000, respectively. You decide to open a hardware store. The opportunity cost of using this building for a hardware store is

Answer 1

Answer:

The opportunity cost = $2.5

Explanation:

Given:

You own a building that has four possible uses: a cafe, a craft store, a hardware store, and a bookstore. The value of the building in each use is $2,000; $3,000; $4,000; and $5,000, respectively.You decide to open a hardware store.

Question asked:

The opportunity cost of using this building for a hardware store ?

Solution:

As we know:

$Opportunity\ cost =\frac{What\ you\ sacrifice}{What\ you\ gain}$

What you sacrifice = Value of a cafe + Value of a craft store + Value of a bookstore

                              = $2000 + $3000 + $5000 = $10,000

What you gain = Value of a hardware store

                        = $4000

Thus, the opportunity cost of using this building for a hardware store is $2.5