What is the ratio of opportunity cost?
Opportunity cost is the value of the next best alternative or option. This value may or may not be measured in money. Value can also be measured by other means like time or satisfaction. One formula to calculate opportunity costs could be the ratio of what you are sacrificing to what you are gaining.
What is the opportunity cost of a trip?
A player attends baseball training to be a better player instead of taking a vacation. The opportunity cost was the vacation. Jill decides to take the bus to work instead of driving. It takes her 60 minutes to get there on the bus and driving would have been 40, so her opportunity cost is 20 minutes.
Which best defines opportunity cost?
What is Opportunity Cost? Opportunity cost is the profit lost when one alternative is selected over another. The concept is useful simply as a reminder to examine all reasonable alternatives before making a decision.
Why is opportunity cost a ratio explain?
Opportunity cost can be expressed first as a marginal unit change, and then as a ratio. Notice also, the trade off effect that is at work in the data. As this economy gives up more and more meat production, it gets more vegetable production, but in smaller increments as we move from points D to A.
What is the opportunity cost quizlet?
opportunity cost. the most desirable alternative given up as the result of a decision. thinking at the margin. the process of deciding whether to do or use one additional unit of some resource. cost/benefit analysis.
What is the definition of opportunity cost quizlet?
opportunity cost. the most desirable alternative given up as the result of a decision. thinking at the margin. the process of deciding whether to do or use one additional unit of some resource.
What is an opportunity cost quizlet?
How is opportunity ratio calculated?
How to Calculate Opportunity Cost
- Opportunity Cost = Return on Most Profitable Investment Choice – Return on Investment Chosen to Pursue.
- Opportunity Cost = $80,000 (selling ten cars worth $8,000 each) – $60,000 (selling 5 trucks worth $12,000 each)
- Opportunity Cost = $20,000.
What is opportunity cost in economics with example quizlet?
The cost of making a choice is that the next best alternative is forgone. This is know as opportunity cost. For example if a Government decides to make the choice of devoting more resources to the NHS then the opportunity cost is devoting those resources into the education system.
What is the opportunity cost of choosing this option?
The opportunity cost of choosing this option is 10% – 0%, or 10%. It is equally possible that, had the company chosen new equipment, there would be no effect on production efficiency, and profits would remain stable. The opportunity cost of choosing this option is then 12% rather than the expected 2%.
What is the difference between risk and opportunity cost?
The key difference is that risk compares the actual performance of an investment against the projected performance of the same investment, while opportunity cost compares the actual performance of an investment against the actual performance of a different investment.
What is the difference between sunk cost and opportunity cost?
A sunk cost is money already spent in the past, while opportunity cost is the potential returns not earned in the future on an investment because the capital was invested elsewhere. 1 Buying 1,000 shares of company A at $10 a share, for instance, represents a sunk cost of $10,000.
What is the opportunity cost of debt and equity?
While both debt and equity require expense to compensate lenders and shareholders for the risk of investment, each also carries an opportunity cost. Funds used to make payments on loans, for example, are not being invested in stocks or bonds, which offer the potential for investment income.