What is opportunity cost definition?
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 and its 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 an opportunity cost in business?
Put simply, opportunity cost is what a business owner misses out on when selecting one option over another. It’s a way to quantify the benefits and risks of each option, leading to more profitable decision-making overall.
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 the opportunity cost in this scenario?
The opportunity cost in this scenario is the three lost opportunities Harry experiences by deciding to go to his parents house. The term opportunity cost refers to the loss of potential gain from other alternatives when one alternative is chosen.
What is opportunity cost and what does it mean for You?
Opportunity cost is an economics term that refers to the value of what you have to give up in order to choose something else. In a nutshell, it’s a value of the road not taken.
How do you explain opportunity cost?
Opportunity Cost. Simply stated, an opportunity cost is the cost of a missed opportunity. It is the opposite of the benefit that would have been gained had an action, not taken, been taken—the missed opportunity.
What is meant by ‘opportunity cost’ in economy?
Opportunity cost is the comparison of one economic choice to the next best choice . These comparisons often arise in finance and economics when trying to decide between investment options. The opportunity cost attempts to quantify the impact of choosing one investment over another.
What are the examples of opportunity cost in a 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.