Answer Expert Verified One method for studying opportunity cost is to
think in terms of trade-offs
. Trade-offs are used to describe and defined what an opportunity cost is. A trade-off is the preferred alternative between two options.
What is the easiest way to find opportunity cost?
The formula for calculating an opportunity cost is simply
the difference between the expected returns of each option
. Say that you have option A—to invest in the stock market hoping to generate capital gain returns.
What is the best measure of opportunity cost?
| Question Answer | The best measure of the opportunity cost of any choice is whatever you have given up to make that choice , even if no monetary costs are involved | The cost of going to college is tuition, the cost of books, and forgone income | The economic way of thinking uses making choices at the margin |
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What are the two types of opportunity cost?
But let's say you do take the shift. Now you'll miss out on time with your family, also an opportunity cost. The two types of opportunity costs are
explicit opportunity cost and implicit opportunity cost
. Explicit opportunity cost has a direct monetary value.
Why do we study opportunity cost?
Opportunity cost
helps us determine how we spend our time
. Every time you make a choice, there is a certain value you place on that choice. You might not know it or think about it, but every choice has a value to you. … The opportunity cost of a choice is what you gave up to get it.
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 is opportunity cost give an example?
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 the opportunity cost of one more candy bar?
| Number of Candy Bars Bags of Peanuts Total Expenditure | 0 10 $15 = $0 + $15 | 4 8 $15 = $3 + $12 | 8 6 $15 = $6 + $9 | 12 4 $15 = $9 + $6 |
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What is the types of opportunity cost?
This distinction gives rise to two types of opportunity cost
–explicit and implicit
. 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.
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.
Can opportunity cost zero?
No, there can never be zero opportunity cost for anything
that we human beings do in this life. … Our opportunity cost when we choose a given action is the value of the next best thing that we could have done. Whenever we choose one action, we must by definition choose not to do some other action.
What is opportunity cost equation?
The Formula for Opportunity Cost is:
Opportunity Cost = Total Revenue – Economic Profit
.
Opportunity Cost = What One Sacrifice / What One Gain
.
Is opportunity cost a real cost?
Opportunity Cost Definition
Opportunity cost is the value of what you lose when you choose from two or more alternatives. … “
The real cost of any purchase isn't the actual dollar cost
. Rather, it's the opportunity cost—the value of the investment you didn't make, because you used your funds to buy something else.”
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
.
