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Difficulty: MediumOpportunity Cost

Kemi, a fashion designer in Ogun State, earns ₦80,000₦80,000 monthly from her tailoring shop. She decides to close her shop for one month to attend an advanced design training program. The program tuition is ₦50,000₦50,000 and training materials cost ₦20,000₦20,000. What is the opportunity cost of Kemi's decision to attend the training program?

  1. The ₦80,000₦80,000 income foregone from her tailoring shopAnswer
  2. B
    The ₦70,000₦70,000 total money spent on tuition and materials
  3. C
    The total sum of ₦150,000₦150,000 combining fees and foregone income
  4. D
    The ₦10,000₦10,000 net difference between her shop income and total program expenses

Answer

The ₦80,000₦80,000 income foregone from her tailoring shop
Opportunity cost is defined as the alternative sacrificed when an economic decision is made. By choosing to attend the workshop, Kemi foregoes the ₦80,000₦80,000 she would have earned from operating her tailoring shop for that month.

Step-by-Step Solution

1
Identify the economic choice made and the alternative sacrificed
Kemi chose to attend the training program instead of operating her tailoring shop for the month.
Opportunity cost is defined as the real cost or next best alternative foregone when a choice is made.
2
Distinguish opportunity cost from money cost
Money cost is the actual financial payment (₦50,000+₦20,000=₦70,000₦50,000 + ₦20,000 = ₦70,000), while opportunity cost is the yield of the sacrificed alternative (₦80,000₦80,000 shop income).
Economic analysis separates real sacrifice (income foregone) from explicit monetary outlays.

Key Concept

Opportunity Cost vs. Money Cost
Estimated Time:1m 15s
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Topics

Opportunity Cost

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