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Joan decided to start a lawn-mowing business. To purchase the mowers and the trailer to transport...

Joan decided to start a lawn-mowing business. To purchase the mowers and the trailer to transport the mowers, Joan withdrew $1,000 from her savings account, which was earning 3% interest (or $30 this year), and borrowed an additional $2,000 from the bank at an interest rate of 7% (or $140 this year). Joan's cost of supplies, gasoline, and transportation for the summer will be $1,000, and she expects to be paid $8,000 by her clients for the lawn mowing services. What is Joan’s opportunity cost of starting and operating her lawn mowing business this year?

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Answer #1

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Joan's opportunity cost of starting and operating her lawn mowing business = interest earned from savings account + interest to be paid against loan from bank = $30 + $140 = $170

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