Question

Ramesh is working at a salary of ₹ 35,000 per month. He receives two job offers: (i) To work as an accountant at a salary of ₹ 30,000 per month; (ii) To work as a sales manager at a salary of ₹ 25,000 per month. In the given case, his opportunity cost will be:

Options

• ₹ 25,000

• ₹ 30,000

• ₹ 35,000

• ₹ 65,000

Answer 1

₹ 30,000

Explanation:

Opportunity cost is the value of the next best alternative foregone. Ramesh’s next best alternative is the accountant job of ₹ 30,000, so that is his opportunity cost; the ₹ 25,000 offer is lower and therefore not the next best alternative.