Question

Pete is a recent finance graduate who has two passions: music and finance. Upon graduation, he was offered an opportunity to join a struggling rock band with a lot of potential, or a job at a large well-established financial services company. By joining the band, he will forego which of the following?

Answer 1

Answer:

He will forego 'job at a large well-established financial services company'

Explanation:

Pete's opportunity cost of 'joining band' is - 'job at huge financial service company'.

Opportunity cost is the cost of next best alternative foregone while choosing an alternative.

Eg: If I like rice & noodles, opportunity cost of eating rice is the other best option i.e noodles.

Similarly: Pete having 2 options of following Music or Finance; deciding to join band - has opportunity cost as the other option i.e 'job at huge financial service company'