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What is meant by opportunity cost?

Joe Ford

What is meant by opportunity cost?

What Is Opportunity Cost? Opportunity costs represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another. Understanding the potential missed opportunities foregone by choosing one investment over another allows for better decision-making.

What is the opportunity cost of a decision answers?

What Is Opportunity Cost? The opportunity cost (also called an implicit cost) of a decision is the value of what you will lose or miss out on when choosing one possibility over another.

What is an example of opportunity cost for a customer?

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 the role of opportunity cost?

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.

What is the opportunity cost of an item?

Economists use the term opportunity cost to indicate what must be given up to obtain something that’s desired. The idea behind opportunity cost is that the cost of one item is the lost opportunity to do or consume something else; in short, opportunity cost is the value of the next best alternative.

Under what farming conditions is opportunity cost zero?

Opportunity cost is zero in agricultural production when: v there are no alternatives/choices in enterprises; v production resources are not limited/are abundant when resources are free.

What are the importance of opportunity cost to an individual?

Answer: Explanation: Opportunity cost like other basic concepts of Economics – scarcity, scale of preference and choice is important to an individual who represents the consumer or household, or firm or productive unit and the government that form the three decision making bodies in an economy.

Why does opportunity cost decrease?

The shape of a production possibility curve (PPC) reveals important information about the opportunity cost involved in producing two goods. 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.

Technology 

What is meant by opportunity cost?

Joe Ford

What is meant by opportunity cost?

What Is Opportunity Cost? Opportunity costs represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another. Understanding the potential missed opportunities foregone by choosing one investment over another allows for better decision-making.

What is opportunity cost Class 11?

Opportunity cost is a concept in Economics that is defined as those values or benefits that are lost by a business, business owners or organisations when they choose one option or an alternative option over another option, in the course of making business decisions. Opportunity costs can be viewed as a trade off.

What is the cost of money in economics?

The cost of money is the opportunity cost of holding money in hands instead of investing it. The trade-off between money now (holding money) and money later (investing) depends on, among other things, the rate of interest that can be earned by investing.

What is the meaning of real cost in economics?

: cost as measured by the physical labor and materials consumed in production.

What are the types of cost?

Types of Costs

  • Fixed Costs (FC) The costs which don’t vary with changing output.
  • Variable Costs (VC) Costs which depend on the output produced.
  • Semi-Variable Cost.
  • Total Costs (TC) = Fixed + Variable Costs.
  • Marginal Costs – Marginal cost is the cost of producing an extra unit.

Which costs are controllable by the project manager?

2) Which costs are controllable by the project manager? The project manager has the most control over direct costs. These are expenses that can be estimated or planned for during the course of the project: wages, equipment, training, meetings, transportation, publicity, advertising, etc.)

Which type of cost is team training?

“You are training the team on the skills required for the project. The cost is directly related to the project and thus a direct cost.” Direct Costs: These costs are directly attributable to the work on the project. Examples are: team travel, team wages, recognition, and cots material used on the project.

How do you calculate SPI?

The schedule performance index (SPI) is a measure of the conformance of actual progress (earned value) to the planned progress: SPI = EV / PV.

What is used to create parametric estimates?

Parametric estimating, a more accurate technique for estimating cost and duration, uses the relationship between variables to calculate the cost or duration. Essentially, a parametric estimate is determined by identifying the unit cost or duration and the number of units required for the project or activity.

Which estimating technique is most accurate?

Bottom-up Estimating

  • This is the most accurate technique and provides reliable results.
  • You can use this technique when you have all the project details.
  • This technique is costly and time-consuming.