A Nike women\'s-only store in California offers women\'s running, training, and

Question

A Nike women's-only store in California offers women's running, training, and sportswear products and also contains an in-store fitness studio for group and personal fitness training sessions. The store consistently earns profits in excess of $586,000 per year and is located on prime real estate in the center of town. The store owner pays $17,000 per month in rent for the building. A real estate agent approached the owner and informed her that she could add $6,900 per month to her firm's profits by renting out the portion of her store that she uses as a fitness studio. While the prospect of acquiring this rental income was enticing, the owner believed the use of that space as a fitness studio was an important contributor to her store's profits.

What is the opportunity cost of continuing to operate the fitness studio within the store?

Explanation / Answer

The opportunity cost of continuing to operate the fitness studio within the store =Foregone rental income

=$6900 Monthly or $82800 Annually

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