Define the term opportunity cost concept
Define the term opportunity cost concept.
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Opportunity Cost: It refers to the cost of foregoing or providing up an opportunity. This is the cost of the next best option. It shows the income of benefit foregone since an exact course of action has been considered. Like Adam smith observed, when a hunter can bag a deer or a beaver within the single day, the cost of deer is a beaver and the cost of beaver is like a deer. A man that who marries a girl is foregoing the opportunity of marrying other girl. A film actress can either do modeling work or act in films. She can’t do the jobs at the same time both. Her acting within the film results in the loss of an opportunity of doing modeling work. Similarly, if an old building is proposed to be utilized for a business, where rent of the building is the opportunity cost. This cost concept was first developed through an Austrian economist, Wieser.
This cost concept plays a significant role in managerial decisions. This is useful in determination of relative prices of various goods. This is also useful in fixing the price of an output factor. Above everything, this help in the best allocation of available resources.
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Short run total revenue of the purely competitive firm would be at a maximum along with: (1) 600 workers. (2) 700 workers. (3) 800 workers. (4) 900 workers (5) 1000 workers. Discover Q & A Leading Solution Library Avail More Than 1416820 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads No hassle, Instant Access Start Discovering 18,76,764 1929981 Asked 3,689 Active Tutors 1416820 Questions Answered Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!! Submit Assignment
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