It has been said that the concept of opportunity cost is central to economics and economic thinking. Understanding opportunity cost will help an entrepreneur determine the true value of decisions.
Suppose you run a lawn-cutting business and use solar-powered equipment that you could sell tomorrow for $5,000. Instead of cutting lawns, you could work as a janitor for $300 a week. You have a savings account that pays a weekly interest rate of 0.20 percent (or$0.002 per dollar. What is your weekly opportunity cost of cutting lawns?