Question
I had a chance to rent my summer home for 2 weeks for $800. But I chose to have it idle. I didn't want strangers
"I had a chance to rent my summer home for 2 weeks for $800. But I chose to have it idle. I didn't want strangers living in my summer house." What term in this chapter describes the $800? Why?
A. Differential cost. It is the difference between two alternatives. It represents the potential cost of either renting the summer house or keeping the strangers out.
B. Outlay cost. The requirement of a future cash disbursement. This cost would be incurred in order to rent the summer house for a two-week period.
C. Incremental benefit. It is the additional revenues or reduced costs generated by a proposed alternative. The additional $800 is the benefit of renting the summer house.
D. Opportunity cost. It is the amount forgone by rejecting an opportunity. It signifies that the value to the owner of keeping those strangers out of the summer house for that two-week period is at least $800.
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