The following figure shows the cost and revenue structures of a firm. MC represents the marginal cost curve, AC represents the average cost curve, AR represents the average revenue curve, and MR represents the marginal revenue curve. P* is the equilibrium price and Q* is the equilibrium output.Figure 9.5

-The opportunity cost of capital is:
A)the cost of labor inputs required to operate that capital.
B)the cost of raw materials necessary to put that capital to work.
C)the payment necessary to keep that capital from moving to an alternative use.
D)the costs of maintenance necessary to keep that capital operating.
E)the cost of hiring more units of capital to generate additional units of output.

Question

The following figure shows the cost and revenue structures of a firm. MC represents the marginal cost curve, AC represents the average cost curve, AR represents the average revenue curve, and MR represents the marginal revenue curve. P* is the equilibrium price and Q* is the equilibrium output.Figure 9.5
 
-The opportunity cost of capital is:
A)the cost of labor inputs required to operate that capital. 
B)the cost of raw materials necessary to put that capital to work. 
C)the payment necessary to keep that capital from moving to an alternative use. 
D)the costs of maintenance necessary to keep that capital operating. 
E)the cost of hiring more units of capital to generate additional units of output.

Quizplus · Accepted Answer

The opportunity cost of capital is the payment necessary to keep that capital from moving to an alternative use. This is because capital is a scarce resource and can potentially be used for alternative purposes that may generate higher returns. Therefore, the opportunity cost of using capital in one particular project or business is the return that could have been earned if that capital had been used elsewhere.

The Following Figure Shows the Cost and Revenue Structures of a Firm