Read the scenario.Jim owns a convenience store. He decides to invest in a hot food buffet. Between building the buffet, hiring a part-time cook, and advertising the food, he spends more than $30,000 over one year.
Answer
A
the wages paid to keep a new cook interested in the job for a whole year
B
the time spent researching the local demand for hot food before paying for the new buffet
C
the one-time expenses needed to run the buffet, such as new cooking and safety equipment
D
the profits lost by not investing the money and time in another service, such as a new gas pump
Explanation
An opportunity cost is the value of the best alternative given up when making a choice. Jim commits money and time to the buffet, so the profits he could have earned by investing them in another service are an opportunity cost. The cook’s wages and equipment costs are direct expenses of running the buffet, not the value of the next-best alternative.
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