Opportunity cost
Opportunity cost is the value of the next best alternative forgone as a result of making a decision. Opportunity cost is a function of scarcity.
What is the value of foregone alternative?
Opportunity cost is the value of the best alternative forgone in making any choice.
Is the next best alternative sacrificed or foregone that could have been employed?
Opportunity cost is defined as the cost of the next best alternative foregone. It represents the sacrifices that people must make due to the scarcity of resources. Resources are limited but wants are unlimited, thus choices must be made.
When you choose the alternative that has the greatest value from among comparable quality products?
Chapter 3
| Question | Answer |
|---|---|
| rational choice | choosing the alternative that has the greatest value from among comparable-quality products |
| competitive advertising | advertising that attempts to persuade consumers that a product is different from and superior to any other |
What is the meaning of alternative forgone?
The condition of having to choose among alternatives. A good for which the choice of one alternative requires that another be given up. A good for which the choice of one use does not require that another be given up. The value of the best alternative forgone in making any choice.
What is the next best alternative sacrificed?
Opportunity Cost
Opportunity Cost is the value of the next best alternative choice you could have made instead of the actual choice you made.
Is the opportunity cost the sum of the available alternatives?
Opportunity cost is not the sum of the available alternatives when those alternatives are, in turn, mutually exclusive to each other. It is the highest value option forgone.
Which is an example of individual decision making?
By choosing to study, the student is implicitly choosing to not go to a party, hang out with friends, or catch up on some much-needed sleep. In this example, the opportunity cost is not easily expressed in dollars and cents, but is just as real.
Which is a pitfall of Ignoring opportunity costs?
Ignoring opportunity costs. The opportunity cost of an activity is the value of the next-best alternative that must be forgone in order to engage in that activity. Pitfall #3 Failure to ignore sunk costs. The only costs that should influence a decision about whether to take an action are those that we can avoid by not taking the action. Pitfall #4
Why are opportunity costs important to individual decision making?
Opportunity costs are an important consideration for economists and business people, but are faced by individuals even when they are not making classically economic decisions. Individuals will choose the option that yields the greatest net marginal benefit.
