Question

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

• A. Rs. 25,000
• B. Rs. 30,000
• C. Rs. 35,000
• D. Rs. 65,000

Hint:

Opportunity cost is the value of the best alternative that is given up when a decision is made. Always compare what is lost versus what is gained.

Answer 1

The Correct Option is B

Step 1: Understanding Opportunity Cost:
Opportunity cost refers to the value of the next best alternative that is forgone when a choice is made. In this scenario, Rajesh has two job options, and he must choose one. The opportunity cost is the value of the job he is not taking.
Step 2: Analyzing the Offers:
- Rajesh's current job pays Rs. 35,000 per month.
- The first job offer is to work as an accountant at a salary of Rs. 30,000 per month. If Rajesh chooses this job, he is giving up his current salary of Rs. 35,000. Thus, his opportunity cost is the difference in salary between the two options.
- The second job offer is to work as a sales manager at a salary of Rs. 25,000 per month. If Rajesh chooses this job, he is giving up his current salary of Rs. 35,000.
Step 3: Conclusion:
The opportunity cost of choosing the accountant job (Rs. 30,000 per month) is the salary of the job Rajesh is giving up (Rs. 35,000). Therefore, his opportunity cost is Rs. 30,000, the salary he would have received from the sales manager position.
Final Answer:
The opportunity cost is Rs. 30,000, making option (B) the correct answer.