What is opportunity cost explain with the help of diagram?

What is opportunity cost explain with the help of diagram?

Explain with the help of a numerical example. An opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action. However if company’s return is only 3% when we could have made a return of 9% from FD, then our opportunity cost is (9% – 3% = 6%).

Is marginal cost equal to opportunity cost?

The Marginal Cost is generally different from the Opportunity Cost in concept. However the Marginal Cost gets equal to the Opportunity Cost only when you look for the cost of producing “only one” extra unit AND when that cost is expressed by the other goods (rabbits VS berries).

What is marginal opportunity cost with example?

Marginal opportunity cost is an economic term that analyzes the effect of producing additional units of a product on the costs of a business, as well as the opportunities the companies give up to produce more of a product.

What best describes the opportunity cost of a decision?

Opportunity cost is used to describe the value that is given up by choosing an alternative option when faced with choices. An opportunity cost does not necessarily need to be monetary and may describe a sense of loss when forgoing a particular option.

What is opportunity cost and how does it affect decision making?

“Opportunity cost is the cost of a foregone alternative. If you chose one alternative over another, then the cost of choosing that alternative is an opportunity cost. Opportunity cost is the benefits you lose by choosing one alternative over another one.”

How do you use opportunity cost in a sentence?

Opportunity cost in a Sentence ?

1. My mother explained she could not buy two snacks and that popcorn would be our opportunity cost if we chose to get candy.
2. Samantha looks at the money should would save living in a cheaper place as the opportunity cost of owning a nice home.

How does the PPF show opportunity cost?

Opportunity cost can be illustrated by using production possibility frontiers (PPFs) which provide a simple, yet powerful tool to illustrate the effects of making an economic choice. A PPF shows all the possible combinations of two goods, or two options available at one point in time.

How do you know if opportunity cost is increasing?

When the PPC is a straight line, opportunity costs are the same no matter how far you move along the curve. When the PPC is concave (bowed out), opportunity costs increase as you move along the curve. When the PPC is convex (bowed in), opportunity costs are decreasing.