Explain with the help of a numerical example. An opportunity cost is
the cost of an alternative that must be forgone in order to pursue a certain action
. … However if company's return is only 3% when we could have made a return of 9% from FD, then our opportunity cost is (9% – 3% = 6%).
What is opportunity cost diagram?
Definition of Opportunity Cost in Economics. … The opportunity costs of a product are only
the best alternative forgone
and not any other alternative. These costs are viewed as the next-best alternative goods that we can produce with the same value of factors which are more or less the same.
What is opportunity cost explain with the help of a diagram?
Explain with the help of a numerical example. An opportunity cost is
the cost of an alternative that must be forgone in order to pursue a certain action
. … However if company's return is only 3% when we could have made a return of 9% from FD, then our opportunity cost is (9% – 3% = 6%).
What is opportunity cost with example and diagram?
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 explain it?
What Is Opportunity Cost? Opportunity costs
represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another
. … Understanding the potential missed opportunities foregone by choosing one investment over another allows for better decision-making.
What is opportunity cost explain it with help of an 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.
What is opportunity cost formula?
The Formula for Opportunity Cost is:
Opportunity Cost = Total Revenue – Economic Profit
.
Opportunity Cost = What One Sacrifice / What One Gain
.
What is an example of opportunity cost in your life?
A player attends baseball training to be a better player instead of taking a vacation
. The opportunity cost was the vacation. Jill decides to take the bus to work instead of driving. It takes her 60 minutes to get there on the bus and driving would have been 40, so her opportunity cost is 20 minutes.
What are the types of opportunity cost?
- Explicit Cost: This is an opportunity cost that involves a money payment and usually a market transaction. …
- Implicit Cost: This is an opportunity cost that DOES NOT involve a money payment or market transaction.
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.
Which scenario is the best example of opportunity cost?
The correct answer is a.
A computer company produces fewer laptops to meet tablet demand
. Opportunity cost defines the benefit obtained by having a commodity after forgoing some other commodity. In the problem statement, the computer company incurs an opportunity cost of laptops for tablets.
What is another name of opportunity cost in economics?
The alternative name of opportunity cost is
Economic cost
.
How do you calculate opportunity cost examples?
The formula is not “what I sacrifice minus what I gain.” Instead, it is necessary to look at
the ratio of sacrifice to gain
. 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.
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%.
How does scarcity affect opportunity cost?
This concept of scarcity leads to the idea of opportunity cost. The opportunity cost of an action is
what you must give up when you make that choice
. … Opportunity cost is a direct implication of scarcity. People have to choose between different alternatives when deciding how to spend their money and their time.
How opportunity cost affects decision making?
We make decisions every day that involve opportunity costs
. Often in life, our decisions are mutually exclusive, meaning it simply is not possible to have two things at once. When this is the case, there is an opportunity cost of the thing we did not chose.
