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Who Invented Opportunity Cost?

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Answered 2009-10-09 20:00:19

This question does not have a simple answer, since the idea has been around for a long time in various forms. Adam Smith wrote about how people have to work to produce things, and so production used to make one thing (in his example, beaver skins) can't be used to make another (deer). David Ricardo, Karl Marx, and Leon Walras further developed the theory of value. The "Austrian Marginalists," such as Karl Menger, Eugen Böhm-Bawerk, and Fredrick Wieser figured out that it was the marginal not the average benefits and costs that determined price, not the average benefits and costs.

Frank Knight and Alfred Marshall worked on how supply and demand interact with opportunity costs, but never developed the full modern version of opportunity costs. It was not until Mises, Robbins and Hayek came along that a full modern subjectivist concept of opportunity cost was developed, but they certainly did not figure it out on their own.

My reference is mostly James Buchanan's "Cost and Choice," which provides an excellent history of opportunity costs. A full version is available here:

Sorry for not giving you a shorter answer. If you need it for a quiz or something, I would say put Fredrick Wieser, who coined the term.

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Opportunity cost is the cost that an opportunity presents. The opportunity benefit is the benefit of the opportunity that is being presented.

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Yes, opportunity cost is a relevant cost because it can be used in something more productive.

What do you understand by the term opportunity cost?

Opportunity cost is what you give up in order to get something else. Paying money is the opportunity cost for ice cream for example.

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The concept of opportunity cost is based on the notion that for every action you take or decision you make, you are losing the benefits of other options. Opportunity cost is that benefit of an opportunity that you lose by choosing some other opportunity.

Why does opportunity cost vary?

Opportunity Cost can vary depending on what you are giving up exactly.

What does increasing marginal opportunity cost mean?

As we decide to choose more units of anything, the opportunity cost of each additional unit will rise. This means that the opportunity cost of the second unit will be greater than that of the first unit. The opportunity cost of the third unit will be greater than that of the second unit. And so forththe law of opportunity cost states that the more of a product that is produced,the greater is its opportunity cost,hence increasing marginal opportunity cost in simple terms refers to an extra or additional opportunity cost of foregoing other products to produce a unit of another product

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Real cost is the price which is real not a fake price

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Opportunity cost is fundamental in understanding the true economist cost (and thus profitability) of actions.

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how is opportunity cost measured {Finding the value of the best options that is not chosen.}

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The opportunity cost of holding money is the nominal interest rate.

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The scarcer the resourse the greater the opportunity cost

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Opportunity cost is what you give up in order to have something else. Girl goes to a movie instead of shopping with friends. Her opportunity cost is shopping with friends.

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Opportunity cost does not decrease, it increases, according to the law of increasing opportunity costs. This law states that the more of a product you produce the less efficient production of it will be and the more opportunity cost they will incur.

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Depends on how you look at it, yes and no.

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When any cost is loss or forego due to acquiring of any of between mutual exclusive projects then that cost is called opportunity cost.