e. fringe benefits as, The opportunity cost of an item is: A. the value of all the alternatives that must be given up in order to engage in any economic activity. Porvoo Area, Finland. It is equally possible that, had the company chosen new equipment, there would be no effect on production efficiency, and profits would remain stable. Emphasise: Peoples values differ. Wha, Opportunity cost of a factor is known as (A) Transfer earning (B) Money cost (C) Present earning (D) None of the above, Your opportunity cost of taking an economics course is: a. the tuition you paid for the course. When your alarm went off, or someone called you, what choice did you face this morning? , . Be sure to. Melbourne, Victoria, Australia. copyright 2003-2023 Homework.Study.com. Is there a difference between monetary and non-monetary opportunity costs? Developing and enhancing the understanding of user engagement through advanced analytics in GA4, tag manager and using third party software . Why? c) among various possible, The opportunity cost of committing a crime and spending 5 years in jail: a. is higher for people who are employed than for the unemployed. Economic profit (and any other calculation above that considers opportunity cost) is strictly an internal value used for strategic decision-making. CO b. can be expressed in the marketplace. The opportunity cost of a particular activity a. is the same for everyone pursuing this activity b. may include both monetary costs and forgone income c. always decreases as more of that activity is pursued d. usually is known with certaintye. Theories, Goals, and Applications. Opportunity cost emphasizes that people are making choices. When considering opportunity cost, any sunk costs previously incurred are ignored unless there are specific variable outcomes related to those funds. b. has no relationship to the various alternatives that must be given up when a choice is made in the context of scarcity. Recent IT Graduate offering a strong academic background in IT combined with rigorous experience as a hands-on IT Support Specialist trainee. = D) a good obtained without any sacrifice whatsoever. With a good on each axis, the production possibilities frontier is downward-sloping, which suggests. Eileen has a comparative advantage over Jan in piano tuning but not in shoe polishing. Opportunity costs incorporate the cost and benefit of each choice, which can at times be challenging to estimate. The opportunity cost of a particular activity a. is the same for everyone pursuing this activity b. may include both monetary costs and forgone income c. always decreases as more of that activity is pursued d. usually is known with certainty e. measures the direct benefits of that activity 2. A production possibility frontier shows the maximum combination of factors that can be produced. d. the cost of the activit, An optimal decision is one that chooses a) the most desirable alternative among the possibilities permitted by the resources available. If investment A is risky but has an ROI of 25%, while investment B is far less risky but only has an ROI of 5%, even though investment A may succeed, it may not. c. matter only to the purchaser of the good. color:#000!important; d. the monetary cost but not the time required. B. executives do not always recognize opportunities for profit as quickly as they should. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can't spend the money on something else. While the opportunity cost of either option is 0%, the T-bill is the safer bet when you considerthe relative risk of each investment. A) The opportunity cost of producing 1 violin is 8 viola. c. has no relationship to the various alternatives that must be given up when a choice is made in the context of scarcity. Opportunity Cost, from the Concise Encyclopedia of Economics. D. the chosen activity minus the value of, The opportunity cost of something is (a) greater during periods of rising prices. (b) equal to the money cost. B) must be rejected. 1) The value of choices forgone once a decision is made is known as: A. Cost- benefit Analysis B. B) prisoner's dilemma. Opportunity cost does not show up directly on a companys financial statements. Pete Rathburn is a copy editor and fact-checker with expertise in economics and personal finance and over twenty years of experience in the classroom. defendant who is accused of robbing a convenience store. She has nearly two decades of experience in the financial industry and as a financial instructor for industry professionals and individuals. Multi-disciplinary engineer with 7+ years of experience in Predictive analysis, Industry interaction cell training, Digital manufacturing, Digital transformation, Thermal energy systems, Project Estimation . c) value of what is forgone when a choice is made. The opportunity cost of a particular economic activity a is the same for each. Does home and contents insurance cover accidental damage? C. the after-tax cost. Accounting profit is the net income calculation often stipulated by Generally Accepted Accounting Principles (GAAP). D) gains from trade are possible only when one person has the comparative advantage color: #000!important; Become a Study.com member to unlock this answer! An example of opportunity is a lunch meeting with a possible employer. Does the point of minimum long-run average costs always represent the optimal activity level? OPPORTUNITY COST. Oct 2016 - Jan 20192 years 4 months. When we look at a production possibilities curve, the opportunity cost can be understood as, C) The amount of the other good that must be given up for one more unit of production, On a given production possibilities frontier, which of the following is not assumed to be, A production possibilities frontier will be bowed out if, B) resources are not perfectly adaptable to making each good, Any combination of two goods that lies beyond the production possibilities frontier. Opportunity costs represent the potential benefits that an individual, investor, or business misses out on when choosing one alternative over another. This theoretical calculation can then be used to compare the actual profit of the company to what the theoretical profit would have been. Option B: Invest excess capital back into the business for new equipment to increase production efficiency. Question: The opportunity cost of a particular activity Select one: a. must be the same for everyone b. is the value of all alternative activities that are forgone c. has a maximum value equal to the minimum wage d. varies from person to person e. can usually be known with certainty The opportunity cost of a particular activity C) Maria could wash half a car in the time it takes to wash a dog. How much does it cost to have a baby with insurance 2021? (d) the value of the next best alternative that is given up to get it. If, for example, a company pursues a particular business strategy without first considering the merits of alternative strategies available to them, they might fail to appreciate their opportunity costs and the possibility that they could have done even better had they chosen another path. (a) least-valued (b) most highly-valued (c) most convenient (d) most recently considered. The value of a human life a. can be subjected to cost-benefit analysis. ; Aragons; Asturianu; ; ; ; Catal; etina; Deutsch; Eesti; Espaol; Euskara; ; Franais . What part of Medicare covers long term care for whatever period the beneficiary might need? Imagine that you have $150to see a concert. Are opportunity costs and sacrifices the same? Indispensable me. D) None of the above is true. Create a team to work on an idea you have. Opportunity Cost is the potential benefit that an individual or an entity loses by choosing one alternative over the other. Therefore, people cannot have all the goods and services they want; as a result, they must choose some things and give up others. Therefore, to determine opportunity cost, a company or investor must project the outcome and forecast the financial impact. then The opportunity cost here is: i. Alternatively, the opportunity cost can be calculated with hindsight by comparing returns since the decision was made. All other trademarks and copyrights are the property of their respective owners. } Opportunity cost is a term in economic theory that refers to the cost of a particular activity as a loss of value or benefit incurred by foregoing an alternative activity. These activities are also helpful in increasing societal welfare. Opportunities refer to favorable external factors that could give an organization a competitive advantage. According to your textbook, a "free" good is Drawing on three decades experience in communications, media and publications management, I provide consulting services for a range of direct clients, as well as project-by-project services for a number of PR, marketing and event businesses.

#mc_embed_signup select { In particular, he recommends his latest read, "The Joys of Compounding" by Gautam Baid. D) painting 2/3 of a room The concept is useful simply as a reminder to examine all reasonable alternatives before making a decision. If so, what would it be? Go back to your list with your partner. No matter which option the business chooses, the potential profit that itgives up by not investing in the other option is the opportunity cost. c. undesirable sacrifice required to purchase a good. When economists refer to the opportunity cost of a resource, they mean the value of the next-highest-valued alternative use of that resource. The opportunity cost of attending the social ev. snowboards each week. b. the monetary value of. That is, opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen. A) must also have a comparative advantage in both goods In economics, opportunity cost represents the relationship between scarcity and choice. Both options may have expected returns of 5%, but the U.S. government backs the RoR of the T-bill, while there is no such guarantee in the stock market. Working with the marketing team to develop the content strategies and PPC campaigns for businesses of all shapes and sizes. Therefore, a. the relative price b. the slope of the budget constraint c. the trade-off facing the individual d. the price of one good valued in terms of the other e. the. d. equals the fine. Comparisons have to be made among competing alternatives, so opportunity costs are considered in the political process. Because opportunity cost is a forward-looking consideration, the actual rate of return (RoR) for both options is unknown today, making this evaluation tricky in practice. d. a choice on the margin. color: #000; B) Sara must have a comparative advantage in carrot chopping D. the highest-valued alternative forgone. Still, one could consider opportunity costs when deciding between two risk profiles. } c. represents all alternatives not chosen. Another way to look at it is that the benefit of making a choice becomes the opportunity cost of not making the choice. c.the opportunity cost. What benefits do you give up? In this scenario, investing $10,000 in company A returned $2,000, while the same amount invested in company B would have returned a larger $5,000. There are no regulatory bodies that govern public reporting of economic profit or opportunity cost. Examples of opportunity cost include investing in a new manufacturing plant in Los Angeles as opposed to Mexico City, deciding not to upgrade company equipment, or opting for the most expensive product packaging option over cheaper options. C. the hi, Opportunity cost is defined as: a. the value of the least desired alternative sacrificed to obtain another good or service, or to undertake another activity. E) painting 3/2 of a room, ECO2023 Exam 1 Study Guide (ch. It incorporates all associated costs of a decision, both explicit and implicit. E) the individual with the lowest opportunity cost of producing a particular good The opportunity cost of a particular activity: a) Must be the same for everyone, b) Is the value of all alternative activities that are forgone, c) Can usually be known with certainty, d) Has a maximum value equal to the minimum wage, e) Varies from perso; The result is what one should expect when alternatives are poorly considered. d. is known as the market price. }

George is an accomplished violin and viola maker. Opportunity cost is the value of the next best alternative in a decision. A student spends three hours and $20 at the movies the night before an exam. These challenges are, in short, the issues of access, quality, and cost. Weighing opportunity costs allows the business to make the best possible decision. Watch television with some friends (you value this at $25), b. Opportunity costs are forward-looking. B. the highest valued alternative you give up to get it. Direct students to work with a partner. For the sake of simplicity, assume that the investment yields a return of 0%, meaning the company gets out exactly what is put in. People choose to do one activity and the cost is giving up another activity. Economic profit (or loss) is the difference between the revenue received from the sale of an output and the costs of all inputs, including opportunity costs. When a company decides to allocate resources to one activity or area, it also decides not to pursue a competing activity. ___ The result when the economy is growing and new workers are hired. A) painting one room These include white papers, government data, original reporting, and interviews with industry experts. Funds used to make payments on loans, for example, cannot be invested in stocks or bonds, which offer the potential for investment income. Which of the following best describes an opportunity cost?
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