what are the opportunity costs of those decisions? course hero

What is opportunity cost example?

A student spends three hours and $20 at the movies the night before an exam. 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).

What is the importance of opportunity costs to decision making and how opportunity costs lead to trade?

Awareness of missed opportunities With the opportunity cost, you will consider the fact that when you make a choice, you have to sacrifice other options. This helps make more economically accurate decisions that maximize your resources.

Which answer best defines opportunity cost?

Opportunity cost is the profit lost when one alternative is selected over another. The concept is useful simply as a reminder to examine all reasonable alternatives before making a decision.

Which describes opportunity cost?

Key Takeaways. Opportunity cost is the forgone benefit that would have been derived from an option not chosen. To properly evaluate opportunity costs, the costs and benefits of every option available must be considered and weighed against the others.

What is opportunity cost in decision-making?

Opportunity cost is the value or benefit of an alternative choice compared to the value of what is chosen. The concept of opportunity cost is used in decision-making to help individuals and organizations make better choices, primarily by considering the alternatives.

How does opportunity cost help in decision-making?

Opportunity cost is an excellent tool that helps calculate the benefits and downsides to each of these choices by assigning a value to both options. By understanding the true financial cost of each outcome, anyone can make more logical and beneficial decisions.

What is the opportunity cost of a decision quizlet?

Opportunity cost is the value of the best alternative forgone in making any choice.

Why is opportunity cost important?

The concept of Opportunity Cost helps us to choose the best possible option among all the available options. It helps us use every possible resource tactfully and efficiently and hence, maximize economic profits.

What is an example of a trade-off that a business would make?

When a farmer decides to use the land to plant broccoli and not cauliflower

Do countries make decisions that involve trade-offs?

Yes, when they decide between “guns or butter” they make this type of decision

What is an example of an opportunity cost?

If a family decides to buy a computer, they can’t use the same money to go on trip, their second choice. The trip is the opportunity cost of buying the computer

Are the opportunity costs and benefits the same for each situation?

No, with each new situation, the opportunity costs and benefits change

Do we always fact an opportunity cost when making a decision?

Yes, when we select one alternative, we have to sacrifice at least one alternative and let go of the benefits.

What helps us make a decision?

By understanding what we are sacrificing by making that decision and whether it is worth it

What makes thinking at the margin effective?

It provides more options in making a decision. You look at the opportunity cost of each extra unit and compare it to the benefit.

The Idea of Opportunity Cost

Opportunity Cost and Individual Decisions

• In some cases, recognizing the opportunity cost can alter personal behavior. Imagine, for example, that you spend $8 on lunch every day at work. You may know perfectly well that bringing a lunch from home would cost only $3 a day, so the opportunity cost of buying lunch at the restaurant is $5 each day (that is, the $8 that buying lunch costs minus...

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Opportunity Cost and Societal Decisions