Opportunity Cost .

• Opportunity Cost

https://store.theartofservice.com/the-opportunity-cost-toolkit.html

Opportunity cost

1 Thus, opportunity costs are not restricted to monetary or financial

costs: the Real versus nominal value (economics)|real cost of Production possibilities frontier|output forgone,

lost time, pleasure or any other benefit that provides utility

(economics)|utility should also be considered opportunity costs.


Opportunity cost - Opportunity costs in production

1 Opportunity costs may be assessed in the decision-making process of production

(economics)|production. If the workers on a farm can produce either one million pounds

of wheat or two million pounds of barley, then the opportunity cost of producing one pound of wheat is the two pounds of barley

forgone (assuming the production possibilities frontier is linear). Firms would make rational decisions by weighing the

sacrifices involved.


Opportunity cost - Explicit costs

1 Explicit costs are opportunity costs that involve direct monetary payment by producers. The

opportunity cost of the factors of production not already owned by a

producer is the price that the producer has to pay for them. For instance, a firm spends $100 on electrical power consumed, their

opportunity cost is $100.https://store.theartofservice.com/the-opportunity-cost-toolkit.html

Opportunity cost - Implicit costs

1 Implicit costs are the opportunity costs in factors of production that a producer already

owns


Opportunity cost - Evaluation

1 The opportunity cost of a city's decision to build the hospital on its

vacant land is the loss of the land for a sporting center, or the inability to use the land for a parking lot, or the money which could have been made

from selling the land


Opportunity cost - Opportunity cost simplified

1 Opportunity cost is what you have to forgo when you choose to do A rather than B.


Interest - Opportunity cost

1 Opportunity cost encompasses any other use to which the money could be put, including lending to others, investing elsewhere, holding cash

(for safety, for example), and simply spending the funds.


Microeconomics - Opportunity cost

1 Opportunity cost of an activity (or goods) is equal to the best next alternative

uses/foregone.



1 Although opportunity cost can be hard to quantify, the effect of

opportunity cost is universal and very real on the individual level. In

fact, this principle applies to all decisions, not just economic ones.



1 Similarly, the opportunity cost of attending university is the lost wages a student could have earned in the workforce, rather than the cost of tuition, books, and other requisite

items (whose sum makes up the total cost of attendance).



1 The true opportunity cost would be the forgone profit of the most lucrative of those

listed.



1 One question that arises here is how to determine a money value for each alternative to

facilitate comparison and assess opportunity cost, which may be more or less difficult depending on the things we are trying to

compare. For example, many decisions involve environmental impacts whose monetary value is

difficult to assess because of scientific uncertainty. Valuing a human life or the

economic impact of an Arctic oil spill involves making subjective choices with ethical

implications.



1 Opportunity cost is vital in understanding microeconomics and decisions that are made.


Cost of conflict - Opportunity Cost

1 According to the reports, countries in the Middle East that are directly

involved in or affected by the Israeli-Palestinian conflict, internal strife in Lebanon and the US invasion of Iraq

have lost a $12 trillion (in 2006 dollar value) in opportunity costs from 1991

to 2010


Production possibility frontier - Opportunity cost

1 Opportunity cost is measured in the number of units of the second good forgone for one or more units of the

first good.


Production possibility frontier - Opportunity cost

1 The ratio of opportunity costs is determined by the marginal rate of transformation.


Feminist economics - Criticisms of opportunity cost

1 There is also the issue of whether any enjoyment of the activity should

be deducted from the opportunity cost estimate.


Austrian School - Opportunity cost

1 Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative

foregone (that is not chosen)


Parable of the broken window - The opportunity cost of war

1 The economic stimulus to one nation's defense industry|defense

sector is offset not only by immediate opportunity costs, but

also by the costs of the damage and devastation of war to the country it

attacks


Economic problem - Opportunity cost and Production Possibility Frontier or Production Possibility Curve.

1 For example, say that we have isolated two goods, food and

clothing, and we look at what would happen if there was increased production of food (there is an

opportunity cost of clothes so clothes would go down as food goes up), this

varies according to what effects there are including new technology

and new resources.https://store.theartofservice.com/the-opportunity-cost-toolkit.html

Economy of Egypt - Opportunity cost of conflict

1 A report[http://www.strategicforesight.com/publication_pdf/39166Cost%20of%20Conflict%20in

%20the%20Middle%20East.pdf], Strategic Foresight Group report: Cost of Conflict in the Middle East 2009 by Strategic Foresight Group has calculated the opportunity cost of conflict for Egypt since 1991 is almost $800 billion. In

other words, had there been peace since 1991, an average Egyptian citizen would be earning over $3000 instead of $1700 he or she may

earn next year.


Opportunity cost of capital

1 The 'opportunity cost of capital' is the expected rate of return forgone

by bypassing of other potential investment activities for a given

capital (economics)|capital.


Economy of Syria - Opportunity cost of conflict

1 A report[http://www.strategicforesight.com/Cost%20of%20Conflict%20-%206%20pager.pdf ] by Strategic Foresight Group, a think tank in Asia has calculated the opportunity cost of conflict for the Middle East from 1991-2010

at US$12 trillion (12,000,000,000,000). Syria's share in this is over a $150 billion. The government also spends almost 7% of its GDP on the military, compared to 2%

spent on health care.


Opportunity costs

1 Thus, opportunity costs are not restricted to monetary or financial

costs: the Real versus nominal value (economics)|real cost of Production possibilities frontier|output forgone,

lost time, pleasure or any other benefit that provides utility

(economics)|utility should also be considered opportunity costs.


Opportunity costs - Explicit costs

1 For instance, if a firm spends $100 on electrical power consumed, its

explicit opportunity cost is $100.[http://www.usna.edu/Users/econ/pschmitt/FE210/review2.pdf Explicit vs


Opportunity costs - Implicit costs

1 The implicit part of the opportunity cost of producing the widget is the revenue lost by not selling the steel and not renting out the machinery

instead of using them for production.


Opportunity costs - Evaluation

1 The opportunity cost of a city's decision to build the hospital on its

vacant land is the loss of the land for a sporting center, or the inability to use the land for a parking lot, or the money which could have been made

from selling the land



1 'Q': Suppose you have a free ticket to a concert by Band A. The ticket has no resale value. On the night of the concert your next-best alternative entertainment is a performance by Band B for which the tickets cost $40. You like Band B and would

usually be willing to pay $50 for a ticket to see them. What is the

opportunity cost of using your free ticket and seeing Band A?



1 'A': The benefit you forgo (that is, the value to you) is the benefit of seeing Band B. As well as the gross benefit of $50 for seeing Band B, you also forgo the actual $40 of cost, so the net benefit you forgo is $10. So, the opportunity cost of seeing Band A is

$10.


For More Information, Visit:

• https://store.theartofservice.com/the-opportunity-cost-toolkit.html

The Art of Servicehttps://store.theartofservice.com






Opportunity Cost .

Documents

Transcript of Opportunity Cost .