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Opportunity cost is the cost of the next-best choice available to someone who has to pick between several choices. It is a key concept in economics used to describe "the basic relationship between scarcity and choice". Opportunity cost is examined by selecting one option and then comparing the expected rewards of that option to the rewards of next option. If a company had money to invest in either marketing or production the opportunity cost of one would be the loss of benefit form not picking the other. For example if the company chooses to invest in marketing instead of improving manufacturing (its next best option) which would increased profits $100000 the opportunity cost of the decision is said to be $100000. If the company makes more than $100000 the company has made a good decision. If the increase in marketing does not make $100000 for the company the decision is considered not at as good as the lost opportunity-cost. It would have been more profitable to invest in the option not selected.
Lolliklvblphd
Trade-off uses the gun's and butter decision while opportunity cost is the most desirable alternative insted of the gun's and butter decision :)
Trade-off uses the gun's and butter decision while opportunity cost is the most desirable alternative insted of the gun's and butter decision :)
Actual cost (real cost): Are those which are actually incurred by the firm in payment for labor, material, plant, building, machinery, equipment ,etc. Opportunity cost: The opportunity cost is the opportunity lost. An opportunity to make income is lost because of scarcity of resources like land, labor, capital etc., or the making of one decision over another decision.
production possibilities graph
Opportunity cost is the cost of the next-best choice available to someone who has to pick between several choices. It is a key concept in economics used to describe "the basic relationship between scarcity and choice". Opportunity cost is examined by selecting one option and then comparing the expected rewards of that option to the rewards of next option. If a company had money to invest in either marketing or production the opportunity cost of one would be the loss of benefit form not picking the other. For example if the company chooses to invest in marketing instead of improving manufacturing (its next best option) which would increased profits $100000 the opportunity cost of the decision is said to be $100000. If the company makes more than $100000 the company has made a good decision. If the increase in marketing does not make $100000 for the company the decision is considered not at as good as the lost opportunity-cost. It would have been more profitable to invest in the option not selected.
It would be helpful to know what the decision is to know what the benefits and opportunity of the decision are. It is important to include this information.
Lolliklvblphd
Trade-off uses the gun's and butter decision while opportunity cost is the most desirable alternative insted of the gun's and butter decision :)
Trade-off uses the gun's and butter decision while opportunity cost is the most desirable alternative insted of the gun's and butter decision :)
Trade-off uses the gun's and butter decision while opportunity cost is the most desirable alternative insted of the gun's and butter decision :)
The opportunity cost were the consumer goods and services.
Actual cost (real cost): Are those which are actually incurred by the firm in payment for labor, material, plant, building, machinery, equipment ,etc. Opportunity cost: The opportunity cost is the opportunity lost. An opportunity to make income is lost because of scarcity of resources like land, labor, capital etc., or the making of one decision over another decision.
Opportunity Cost
Economics affects all out our decision making in the market. When we decide to buy a sweater instead of jeans, in your head you examined the opportunity cost of the jeans to the sweater and determined which you wanted. This is an economic principle, even though many people do not think of it in terms of opportunity costs.
help you determine the oppotunit cost of your decision.