Your Aunt Imelda is thinking about opening a pub. She estimates that it would cost €500 000 per year to rent the premises, buy a licence to serve alcohol and to buy in enough Murphy’s Irish Stout from the brewery. In addition, she would have to leave her €50 000 per year job as an accountant.

a. Define opportunity cost.

b. What is your aunt’s opportunity cost of running the pub for a year? If your aunt thought she could sell

€510 000 worth of Murphy’s in a year, should she open the pub? Explain.