2
$\begingroup$

I'm told that forgone job opportunities are implicit costs, to be included in calculating economic profit, but I can't seem to see how I could list and consider many different forgone opportunities. My question here is how do we do so?

For example, if I have a piece of land or big city real estate, there could be a great many different uses for it. If I considered each of these forgone opportunities an implicit cost, I would think the expression of my economic costs would be useless to me.

So I suspect that either I'm suffering from an oversimplified ECON101 explanation of implicit and opportunity costs or simply an incorrect one. Any references would be appreciated.

| improve this question | |
$\endgroup$
0
$\begingroup$

We don't use all possible opportunity costs. We only use the cost of forgoing the next-best-alternative.

| improve this answer | |
$\endgroup$
  • 1
    $\begingroup$ There are two mistakes in your answer: First, opportunity cost is defined as the value (not the cost) of the next best alternative. Second, the cost (or value, for that matter) of the other (lower-ranked) alternatives are not opportunity cost. $\endgroup$ – Herr K. Dec 17 '18 at 21:08

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.