The opportunity cost is
time spent studying and that money to spend on something else
. A farmer chooses to plant wheat; the opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment). A commuter takes the train to work instead of driving.
What is opportunity cost simple words?
Opportunity cost is
the profit lost when one alternative is selected over another
. The concept is useful simply as a reminder to examine all reasonable alternatives before making a decision. For example, you have $1,000,000 and choose to invest it in a product line that will generate a return of 5%.
What is an example of opportunity cost in business?
Small businesses factor in opportunity costs
when computing their operating expenses in order to provide a bid or estimate on the price of a job
. For example, a landscaping firm may be bidding on two jobs each of which will use half of its equipment during a particular period of time.
How do you find opportunity cost simple example?
Going back to our example, if you chose to spend an hour working as a bartender instead of as a mechanic, then you are actually giving
up ($50 mechanic / $25 bartender)
= $2 of opportunity cost.
Which situation is the best example of opportunity cost?
It is the important concept in economics and also the relationship which is between choice and scarcity. A good example of opportunity cost is
you can spend money and time on other things but you can not spend time reading books or the money in doing something which can help
.
What are the three examples of opportunity cost?
- Someone gives up going to see a movie to study for a test in order to get a good grade. …
- At the ice cream parlor, you have to choose between rocky road and strawberry. …
- A player attends baseball training to be a better player instead of taking a vacation.
What are three types of opportunity cost?
Three phrases in the definition of opportunity cost
warrant further discussion–alternative foregone, highest valued, and pursuit of an activity
.
What is opportunity cost explain with example?
When economists refer to the “opportunity cost” of a resource, they
mean the value of the next-highest-valued alternative use of that resource
. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can't spend the money on something else.
Why is opportunity cost important?
The concept of Opportunity Cost
helps us to choose the best possible option among all the available options
. It helps us to use every possible resource tactfully, efficiently and hence, maximize economic profits.
What is opportunity cost kid definition?
Kids Encyclopedia Facts. Opportunity cost is
the value of the next best thing you give up whenever you make a decision
. It is “the loss of potential gain from other alternatives when one alternative is chosen”.
What is the formula for opportunity cost?
Opportunity cost is the benefit you forego in choosing one course of action over another. You can determine the opportunity cost of choosing one investment option over another by using the following formula:
Opportunity Cost = Return on Most Profitable Investment Choice – Return on Investment Chosen to Pursue
.
What is the opportunity cost of a decision?
Opportunity cost is
the value of what you lose when you choose from two or more alternatives
. It's a core concept for both investing and life in general. When you invest, opportunity cost can be defined as the amount of money you might not earn by purchasing one asset instead of another.
What is the opportunity cost in civilian output?
What is the opportunity cost (in civilian output) of a defense buildup that raises military spending from 4.0 to 4.3 percent of an $18 trillion economy? Opportunity cost
is what all a person gives up, to consume a good
. In other words, it is the cost of the second-best alternative.
What kind of advantage does a country have if it can make a product?
In economic terms, a country has a
comparative advantage
when it can produce at a lower opportunity cost than that of trade partners. While a country cannot have a comparative advantage in all goods and services, it can have an absolute advantage in producing all goods.
When a country has an absolute advantage?
Absolute advantage is when
a producer can produce a good or service in greater quantity for the same cost
, or the same quantity at a lower cost, than other producers. Absolute advantage can be the basis for large gains from trade between producers of different goods with different absolute advantages.
What does comparative advantage mean in business?
Comparative advantage is an
economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners
. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.
