Question

Simplify the answers please.

1) Suppose you quit your job, which were paying you $60,000 salary, to open your own accounting firm. You decided to use your own flat, which was bringing you a rental income of $15,000, as an office for your own accounting firm. You will withdraw your money from the bank, which was bringing you an interest income of $10,000, to be able to finance the initial investment for your own accounting firm. What is the opportunity cost of opening your own accounting firm?

Hint: 1)Find the opportunity cost of working in your own firm

2)Find the opportunity cost of using your own flat for your company

3)Find the opportunity cost of using you own money to finance your company

4)Find the the total opportunity cost of opening your firm

Answer 1

TA):-he opportunity cost of working for your own job= 60000 as it is the forgone benefit as a salary.

B) :-flat is used as an office for the firm which are generating $15000 rental income

SO the opportunity cost of using flat as a office is 15000

C) :- generating $ 10000 interest income was the amount withdraw from the bank to finance firm so the opportunity cost of financing the own firm = $10000

D) :- total opportunity cost = sum of all cost

= 60000+15000+10000

= 85000

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