Rachel is thinking of starting a bookstore that would require her to invest $75,000 for inventory (books), furniture and other

such items. Currently, she has her money invested in stocks, which she expects to return about 10 percent per year. She feels

that the investment in her own bookstore would be no more risky than her current investment in stocks. What would the

opportunity cost be to Rachel for the money she invests in the bookstore?

Question

Mathematics

Enrique Hernandez

22 January, 16:35

Rachel is thinking of starting a bookstore that would require her to invest $75,000 for inventory (books), furniture and other

such items. Currently, she has her money invested in stocks, which she expects to return about 10 percent per year. She feels

that the investment in her own bookstore would be no more risky than her current investment in stocks. What would the

opportunity cost be to Rachel for the money she invests in the bookstore?

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Answers (1)

Know the Answer?

Reed Hess · Answer 1

Opportunity cost for the money Rachel invests in the bookstore is $7500

Step-by-step explanation:

Whenever a choice has to be made between two alternatives. One has to be selected and the other has to be foregone. Opportunity cost is the cost of alternative foregone.

If Rachel is thinking of starting a bookstore rather than investing that money in stocks than he will have to forgo the return he will get by investing in stocks.

so Return on stock will be 10%of $75000

i. e $7500

$7500 is the opportunity cost of starting a bookstore.