Korie wants to start her own business making custom furniture. She can purchase a factory that costs $400,000 . Korie currently has $500,000 in the bank earning 3 percent interest per year. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?
a. $3,000
b. $6,000
c. $15,000
d. $18,000
d
You might also like to view...
In John Rawls’ A Theory of Justice, people choose the rules for distributing income from behind a veil of ignorance. People understand that ability determines income, but they do not know their abilities or the abilities of others. Rawls argues that people are risk averse and will choose the distribution rule that maximizes their income in the worst-case scenario (they have relatively little ability). An economist would call this strategy
A. minimax. B. maximin. C. irrational. D. tacit collusion.
Refer to Figure 4-5. Which of the following would cause the demand curve to shift from Demand C to Demand A in the market for tennis balls in the United States?
The substitution of one good for another by consumers:
A. is not captured by the CPI. B. is captured by the CPI. C. due to price changes is captured by the CPI. D. due to changes in tastes/preferences is captured by the CPI.
A decrease in the real wage would result in a
A. shift of the labor demand curve, causing a decrease in the number of workers hired by the firm. B. movement along the labor demand curve, causing a decrease in the number of workers hired by the firm. C. movement along the labor demand curve, causing an increase in the number of workers hired by the firm. D. shift of the labor demand curve, causing an increase in the number of workers hired by the firm.