Unformatted text preview: purchase a truck and a mower for $10,000 and start mowing lawns. Your annual cost for fuel and other supplies is $2,000. Now, instead of investing your money in the lawn-care business you could have invested the $10,000 in a bank account earning 8 percent annual interest. Additionally, you could have earned $30,000 in another job if you didn’t start your own business. So what is your total annual cost (including opportunity cost) of operating your own lawn-care business? Explain. (20 points) Ans: Annual cost of fuel and other supplies is $2,000. The opportunity cost of not investing the $10,000 in the bank is the lost interest income which is $800. The opportunity cost of your time is the $30,000 you sacrificed by being your own boss. Therefore, the total annual cost of doing business is $2,000 + $800 + $30,000 = $32,800....
View Full Document
This note was uploaded on 11/23/2010 for the course ECONOMICS Econ 13 taught by Professor Georgesarraf during the Spring '10 term at UC Irvine.
- Spring '10
- Opportunity Cost