Suppose you have recently graduated and have been offered a

Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of $125,000 (including all benefits) per year. After much consideration, you turn down the offer to start your own accounting firm. You pay yourself $75,000 (including all benefits) a year. Which of the following represents the opportunity cost of your time? O A. $125,000 O B. $50,000 C. $75,000 O D. $100,000

Solution

Opportunity cost is the value of next best alternative foregone.

To pay yourself $ 75000 a person, person has sacrificed $ 125000 per year. So, next best alternative which is foregone is $ 125,000.

Answer is A) $ 125,000