Problems of the cost of production - opportunity cost?

Question

Your aunt is thinking abt opening a hardware store. She estimates tat it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have a quit her $50,000 per year job as an accoundant.
a) define opportunity cost
b) wat is your aunt's oppurnity cost of running a hardware store for a year? If your aunt thought she could sell $510,000 worth of merchandise in a year, should she open the store? Explain.

Answer 1

A) Opportunity cost is defined as the cost of the second thing you would be doing if you weren't doing what you are doing!! Or "the cost of the alternative thing I would be doing"

B) Her opportunity cost would be $550,000.
She should not open the store. The $510,000 in sales would generate x amount of gross margins (we would need to know the margin) and would most likely not equal her current salary of $50,000 a year.

Answer 2

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