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Consider a company is faced with the following two mutually exclusive options: Option A: Invest excess capital in the stock market to potentially earn capital gains. The opportunity cost of a particular activity 1. is the same for everyone pursuing this activity 2. may include both monetary costs and forgone income 3. always decreases as more of that activity is pursued 4. usually is known with certainty e. measures the direct benefits of that activity Answer Practice set and Exam Quiz Yes! Alternative A B Cost BD 5,400 BD 7,300 Salvage Value 400 600 Annual Benefit 1,500 x, It has been said that the concept of opportunity cost is central to economics and economic thinking. I've previously worked at St. Michael's Hospital in Toronto on two different occasions. 1 answer below 141.The opportunity cost of a particular activity a.is the same for everyone pursuing this activity b.may include both monetary costs and forgone income c.always decreases as more of that activity is pursued Go back to your list with your partner. In other words, the value of the next best alternative. A) The opportunity cost of washing a dog is greater for Maria. E. none of the above, Opportunity cost is best defined as (all of the other or the next best) alternative(s) that must be sacrificed to obtain something or to satisfy a want. ___ The result when the economy is growing and new workers are hired. Debrief. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book . Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. Individuals will place different value on the relative benefits of a set of alternatives and will thus make different choices. Opportunity cost c. A trade-off d. The equimarginal principle. Are opportunity costs based on a person's tastes and preferences? Opportunities and Costs - Foundation for Economic Education If you deposit $7,000 today, how much will you have in the account in 5 years? It may not be immediately clear to a company the best course of action; however, after retrospectively assessing the variables above, they may further understand how one option would have been better than the other and they have incurred a "loss" due to opportunity cost. d. is all of the above. The opportunity cost of choosing this option is then 12%rather than the expected 2%. Consistently recognized for technical troubleshooting skills used to resolve technical issues rapidly and cost-effectively. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can't spend the money on something else. This can be done during the decision-making process by estimating future returns. C. the lowest valued alternative you give up to get it. c. is generally the same for most people. Using opportunity cost calculations allows business owners and other stakeholders to determine the most valuable and profitable decision and the return of a foregone option. With a good on each axis, the production possibilities frontier is downward-sloping, which suggests. advantage in producing that good The opportunity cost is the value the company forgoes when choosing one option over another, whether the loss is monetary or use of time (productivity) or energy (efficiency).