You own a building that has four possible uses: a tailor shop, a pharmacy, a sports bar, and an antique mall. The building's value in each use is $4,000; $6,000; $8,000; and $10,000, respectively. You decide to open a sports bar. The opportunity cost of using this building for a sports bar is
A) $4,000, the value if the building is used as a tailor shop.
B) $6,000, the value if the building is used as a pharmacy.
C) $20,000, the sum of the values if the building is used for a tailor shop, a pharmacy, or an antique mall.
D) $10,000, the value if you rented the building to someone else to use as an antique mall.

Question

Quizplus · Accepted Answer

The opportunity cost is the value of the next best alternative foregone. In this case, the next best use of the building is as an antique mall, which would bring in $10,000, making D the correct answer.

You Own a Building That Has Four Possible Uses: a Tailor