The Opportunity Cost of Capital Is

question 398

Multiple Choice

The opportunity cost of capital is

• A) the rate of return realized on an investment.
• B) the rate of return that could be earned by the owner's capital were it used elsewhere.
• C) the rate used to calculate a firm's tax liability.
• D) the rate of interest the government uses to calculate legal business tax penalties.

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Definitions:

Economic Activity

Actions that involve the production, distribution, and consumption of goods and services within an economy.

Skill Mismatch

A discrepancy between the skills offered by workers and the skills demanded by employers, which can lead to structural unemployment and inefficiency in the labor market.

Stagnant Economy

An economic condition characterized by slow or no growth in production, employment, and other indicators of economic health.

Simultaneous Inflation

A situation where prices of goods and services rise at the same time across different sectors of an economy.