Since consumers’ resources such as time, attention, and money are limited, they must choose how to best allocate them by making tradeoffs. When scarce resources are used (and just about everything is a scarce resource), people and firms are forced to make choices that have an opportunity cost.
What are the importance of opportunity cost to individual firm and government?
(ii) Importance of opportunity cost to the Government: It helps the government in deciding which sector will receive more resources. It helps the government in making decision on how to spend its revenue in carrying out its numerous projects, e.g. the government may allocate more resources to defence or infrastructure.
Why are there always opportunity cost when we should from making one product to another?
underutilization. Why are there always opportunity costs when we shift from making one product to another? Some resources are better suited for use in making the first product. using resources in such a way as to maximize the production of goods and services.
Why should choices be made to allocate resources?
Due to the scarcity of resources, we cannot produce the unlimited want of production. If all the resources are used to produce only one commodity then there will be no more resources for the next commodity. In order to manufacture the goods, the resources must be allocated.
Why do government experts track the business cycle?
why does the government track and seek to influence business cycles? to promote economic growth and stability. how does the government allocate and mange some resources by managing externalities? determining which one is positive or negative to produce goods and services that generates benefit or costs to someone.
Why is opportunity cost important to the firm?
Opportunity Cost helps a manufacturer to determine whether to produce or not. He can assess the economic benefit of going for a production activity by comparing it with the option of not producing at all. He may invest the same amount of money, time, and resources in another business or Opportunity.
