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You are contemplating the purchase of a server for your IT business. The server costs $18,000....

Question:

You are contemplating the purchase of a server for your IT business. The server costs $18,000. After one year, you would be able to sell the server for $8,000. At the moment, your bank is offering a 9% interest rate on financial investments.

What is the opportunity cost of keeping the server for one year?

Opportunity Cost

The cost of the next best alternative which is incurred by selecting another option is known as opportunity cost. Opportunity cost is used while analyzing cost and benefit of a project.

Answer and Explanation: 1

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The opportunity cost for keeping the server for one year is $11,620.

Given Information:

  • The cost of the server is $18,000
  • Selling price of the...

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Law of Increasing Opportunity Cost: Definition & Concept

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Chapter 3 / Lesson 8
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What is the law of increasing opportunity cost? Learn how to calculate opportunity cost, see law of increasing opportunity cost examples, and view graphs.


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