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What is the concept of opportunity cost?

What is the concept of opportunity cost?

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A. What you give up to get that item.
B. The dollar value of the item.
C. Usually less than the dollar value of the item.
D. The number of hours needed to earn money to buy the item.
E. None of the above

This question is part of Principles of Economics QUIZ #1
Asked by Cypriot, Last updated: Aug 05, 2020

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3 Answers

h.Jennifer

H.Jennifer

Answered Apr 23, 2018

In micro-economic theory, the opportunity cost, also known as alternative cost, is the value (not a benefit) of the choice of a best alternative cost while making a decision. Opportunity cost is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice.

The law of increasing opportunity cost is the concept that as you continue to increase production of one good, the opportunity cost of producing that next unit increases. This comes about as you reallocate resources to produce one good that was better suited to produce the original good.

A benefit, profit, or value of something that must be given up to acquire or achieve something else. Since every resource (land, money, time, etc.) can be put to alternative uses, every action, choice, or decision has an associated opportunity cost.

 

e.Ronald

E.Ronald

Answered Jan 03, 2018

Executives are often involved in making difficult decisions. One such executive was considering whether to move his company and workers to a new office in downtown Columbia, SC. The new rent would be greater, but the new location would be better for his business.

This process of weighing what is being sacrificed in order to obtain the future situation is called the “opportunity cost.” In this case , whether it is better to move to the new location and pay higher rent in order to make more profit because of a better location, takes a lot of research and investigation. It’s never easy but an executive weighs the two and sometimes puts his job on the line to help his company profit.

 

John Smith

John Smith

Answered Jan 12, 2017

What you give up to get that item.
 

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