Question

Happy Corporation does not use a portion of its factory. So, it rents this unused part to another company for $1,230 per month. The rental agreement will expire the following month. Happy Corporation is thinking about using the space itself to store certain materials, instead of renewing the agreement. The term to describe the amount of $1,230 per month is:

Answer 1

Opportunity cost is the term used to describe the amount of $ 1230 per month

The Amount of $ 1230 per month represent the amount of rent revenue that a corporation earns every month from renting of a business space.However now a coporation wish to use the space for storing its material thus it will forgo the amount of rent that it earns every month if it uses it for storage purpose .This is called opporunity cost that is benefit forgone from other alternative .

In the given case ,If space is used for storage of material ,rent revenue from renting of space will be forgone that a firm can earn .