what is the opportunity cost of economic growth? . 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 an opportunity cost coursehero?

Opportunity cost is the value or benefit of the next best alternative given up when making a choice.

Which describes opportunity cost?

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.

What is the opportunity cost of investing in capital?

The opportunity cost of capital is the incremental return on investment that a business foregoes when it elects to use funds for an internal project, rather than investing cash in a marketable security.

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What is the opportunity cost of economic growth?

Economics is about counting costs, and the cost to be counted is “opportunity cost,” arguably the most basic concept in economics. It is defined as the next best alternative to the one chosen, in other words, as the best of the sacrificed alternatives.

What is opportunity cost and why is it important?

Opportunity cost is the difference in the benefit of a choice you are forgoing compared to the benefit of the choice you are making. You'll recognize opportunity cost as an estimation of how much regret you'll feel for making one choice over another.

Which answer best defines opportunity cost?

Opportunity cost is defined as the value of the next best alternative.

Which of the following is the best example of opportunity cost?

For example, choosing public transportation to travel to a particular destination by foregoing the option of traveling in one's own car is a good example of opportunity cost, because you end up saving money which needs to be spent on fuel.

How do you determine the opportunity cost of an investment?

Calculating opportunity cost Remember that opportunity cost is calculated by subtracting the rate of return on your chosen option from the rate of return on the best foregone alternative, rather than from the sum of the rate of return of all the possible foregone alternatives.

How do you calculate opportunity cost in economics?

How to Calculate Opportunity CostOpportunity Cost = Return on Most Profitable Investment Choice - Return on Investment Chosen to Pursue.Opportunity Cost = $80,000 (selling ten cars worth $8,000 each) - $60,000 (selling 5 trucks worth $12,000 each)Opportunity Cost = $20,000.

Which is studied under microeconomics?

Definition: Microeconomics is the study of individuals, households and firms' behavior in decision making and allocation of resources. It generally applies to markets of goods and services and deals with individual and economic issues.

What Cannot be illustrated by the production possibilities frontier?

The PPF represents a trade-off between two goods. So, accordingly, it cannot illustrate equality because, at a particular point on the PPF, it depicts how two goods are produced.

Which of the above information is relevant to your decision on whether to take the job?

Which of the above information is relevant to your decision on whether to take the job? The relevant costs are the opportunity cost of taking the job (forgone earnings from your current job) and other things you could have done with the money you need to pay for business school.

What has happened to the marginal benefits of growth?

In sum, growth has become uneconomic at the margin, making us poorer, not richer. Uneconomic growth leads to less available wealth to share with the poor, not more. And such growth in the U.S. in recent years has been accompanied by increasing inequality in the distribution of income and wealth – that is, the marginal benefits of growth have gone overwhelmingly to the rich (third car s and second homes) while the marginal costs (polluted neighborhoods, unemployment and foreclosures) have gone mainly to the poor.

How does the macroeconomy affect the ecosystem?

Trees are physically transformed into tables and chairs; soil, rain, and sunlight are physically transformed into crops and food and then into people; petroleum is physically transformed into motive force, plastics, and carbon dioxide. Thanks to the law of conservation of matter-energy, the more matter-energy appropriated by the economy, the less remains to build the structures and power the services of the ecosystem that sustains the economy. Thanks to the entropy law, the more dissipative structures (human bodies and artifacts) in the economy, the greater the rates of depletion and pollution of the remaining ecosystem required to maintain the growing populations of these structures against the eroding force of entropy. These are basic facts about how the world works. They could plausibly be ignored by economists only as long as the macroeconomy was tiny relative to the ecosystem, and the encroachment of the former into the latter did not constitute a noticeable opportunity cost. But now we live in a full world, no longer in an empty world – that is, in a finite ecosystem filled up largely by the economy. Remaining ecosystem services and natural capital are now scarce and their further reduction constitutes a significant opportunity cost of growth.

What would happen if there was no scarcity?

If there were no scarcity, choice would not be necessary, there would be no opportunity cost, and economics would not exist. More of everything means opportunity cost is zero, and is essentially the denial of economics. Yet “more of everything” is the goal of so-called “growth economics.”.

What are the costs of economic growth?

Costs of economic growth. Economic growth means an increase in real GDP – an increase real incomes. This is usually considered beneficial, but there are also potential costs of economic growth such as: Environmental costs – pollution, loss of non-renewable resources. Potential of widening inequality.

How does economic growth affect the quality of life?

This causes an increase in pollution. Increased pollution from economic growth will cause health problems such as asthma and therefore will reduce the quality of life. Economic growth also means greater use of raw materials and can speed up depletion of non-renewable resources.

Why does economic growth increase inequality?

Higher rates of economic growth have often resulted in increased inequality because growth can benefit a small section of society more than others. For example, those with assets and wealth will see a proportionally bigger rise in the market value of rents and their wealth.

How does economic growth cause inflation?

Economic growth tends to cause inflation when the growth rate is above the long run trend rate of growth. It is when demand increases too quickly that we get a positive output gap and firms push up prices. Graph showing economic growth caused by rising AD leads to inflation. 2. Boom and bust economic cycles.

Why is the UK susceptible to a current account deficit during high growth?

The UK is susceptible to a current account deficit during high growth because the UK has a high marginal propensity to import. 4. Environmental costs. Increased economic growth will lead to increased output and consumption. This causes an increase in pollution.

What are environmental costs?

Environmental costs – pollution, loss of non-renewable resources. Congestion. Potential of widening inequality. The costs of economic growth will depend on the type of growth that we see.

Can unskilled people benefit from economic growth?

Those unskilled without wealth may benefit much less from growth. However, it depends upon things such as tax rates and the nature of economic growth. Economic growth can also be a force for reducing absolute and relative poverty. 6.