Question

Rakesh is working as a Branch Manager at IDFC Bank at a salary ₹ 1,50,000 per month. He received 2 more job offers: An offer of ₹ 1,20,000 from HDFC Bank and an offer of ₹ 1,15,000 from Axis Bank. Opportunity Cost of Rakesh for working as a Branch Manager in IDFC Bank is:

Options

• Offer of ₹ 1,20,000 from HDFC Bank

• Offer of ₹ 1,15,000 from Axis Bank

• Both (a) and (b)

• None of these

Answer 1

Offer of ₹ 1,20,000 from HDFC Bank

Explanation:

Opportunity cost is the value of the next-best alternative forgone. Since the HDFC offer of ₹ 1,20,000 is the better of the two alternatives, it is Rakesh’s opportunity cost.