Questions tagged [opportunity-cost]

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Should opportunity cost includes explicit cost? When should includes so?

From my A-level education, the opportunity cost was defined as the next best alternative forgone, but from Perloff's microeconomics and Joshua Gan's principle of microeconomics, it seems the ...
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Opportunity cost on PPC

Hi, I'm trying to learn opportunity cost and this is an image I took from Khanacadmeny. They said that due to the bowed out shape, it means that there is an increasing opportunity costs of production. ...
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What is the problem with this opportunity cost example?

The "stand-up economist" Yoram Bauman used the concept of opportunity cost to make the following joke: [S]omebody offers you a choice between a Snickers bar and a package of M&Ms. ...
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When choosing among alternative projects, must one always adjust for opportunity cost?

When evaluating a business project, a textbook recipe is to take incremental income from the project and subtract the incremental costs -- including opportunity costs -- to arrive at the incremental ...
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Is there a formal definition of opportunity costs, economic costs, and/or economic profits?

[Edited to remove a mistake in a definition and some typos.] According to various econ textbooks (e.g. this one), there is a fundamental distinction between economic profit and accounting profit: (i) ...
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What Interest Rate used to calculate opportunity cost?

What Interest Rate used to calculate opportunity cost (Calculating Future Value/Present Value)? Usually in the textbook it said that the rate used is government bonds interest rate(since it's risk ...
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opportunity cost when inside production possibility frontier

I am a bit confused about whether there is a opportunity cost moving from within the PPF to be closer to the PPF and use some of the unemployed resources. I current thinking is that there is zero ...
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Opportunity Cost Comparisons

Suppose we have 1 firm and the firm has three options: (1) Produce and get \$100 in revenue - \$200 in costs = -\$100 in profit. (2) Temporarily shut down and pay fixed costs = -\$50 in profit. (3) ...
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What is the opportunity cost of going to a football match?

According to this video: Opportunity Cost of a choice is what you gave up to get it. Now, let us read the following question: You are going to a football match next Saturday evening, you have ...
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Opportunity cost of goods provided free of cost

If the government of a country decides to provide certain good free of cost to its citizens, what can one say about the opportunity cost? Government is certainly using the revenues raised from the ...
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What is the opportunity cost of doing something in your spare time?

My university is using this textbook. The text clearly states, “Economists use the term opportunity cost to indicate what must be given up to obtain something that is desired.” This leads me to ...
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How has decreasing quality (or the need to pay more for the same quality) tracked with inflation?

I'm trying to identity a missing variable that could affect poor and middle class consumers more than more wealthy/resourceful individuals. Assuming that there are decisions regarding cost reductions ...
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116 views

How to find opportunity cost if each choice has more than one important effect?

Let me start with an example where I DO understand how to find opportunity cost. Suppose I have choice to either work for firm A (\$1000 wage) or for firm B(\$2000 wage) or for firm C(\$500 wage). If ...
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In the long run, would a production-possibility curve expand outward if the country preferred more consumer goods than capital goods?

PPC will not expand outward if the country preferred more consumer goods than capital goods. The total amount of resources in an economy at any given point of time is fixed. If a country ...
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493 views

Is the opportunity cost under the supply curve?

Is it correct to say that the opportunity cost is a particular point on the supply curve? And if so, why? I understand what is going on with the opportunity cost with the production possibilities ...
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Why is the opportunity cost 0 in this case?

My book says that the opportunity cost of purchase of a specialized equipment that has no alternative use is zero and hence such an expenditure is a sunk cost. However, while calculating the user cost ...
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What is an opportunity cost?

Mankiw's definition and explanation of opportunity cost here is confusing. Since when have explicit costs become part of opportunity cost? Here is what the guide says: The concept of opportunity ...
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937 views

Opportunity profits vs. opportunity costs

Having learned that Opportunity costs = the costs for avoided profits are a well established and quite useful economic concept, I wonder how its counterpart is officially called and investigated: ...
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How to calculate the after tax WACC

So i have this question: Assume the following data for U&P Company: Debt (D) = $100 million; Equity (E) =$300 million; rD = 6%; rE = 12%; and TC = 30%. Calculate the after-tax weighted average ...
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Simple cost analysis question

I am stuck at a very simple problem: Suppose, I am running out of insurance, and as a result, I am incurring a the cost of A with event 1 + the cost of B with event 2. Now, I go ahead and buy an ...
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Are opportunity costs synonymous with economic costs?

I was working on a question that asked the opportunity costs of going to college per year given that college tuition is $ x $ and the salary per year is $ y $. The answer given is $ x + y $. I ...
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Why (Im) is gross(before personal tax-BPT) rate of return(ROR) by saver?It should be net ROR & APT, as SS' curve is after personal tax is imposed [closed]

![the image was taken from public finance book by Musgrave and Musgrave ]1Pave 156(fig. 9.5)
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How is "opportunity cost" an useful concept? Even when it does exist?

How is "opportunity cost" an useful concept? Even when it does exist? What use does it serve?
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Production Possibility Frontier and Opportunity cost

The following is a list of data points on a PPF, answer questions regarding opportunity cost. What is the opportunity cost of producing the first 500 Toyota? The opportunity cost of producing the ...
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What is Opportunity Cost?

Suppose you have 2 activities, A and B. Doing activity A gives a return of 100 dollars, doing activity B gives a return of -50 dollars. What would be the opportunity cost of choosing activity B? 100 ...
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437 views

What is the opportunity cost if I choose the option of highest value

I had a confusion about opportunity cost. Suppose I have three alternatives which can be completed in same time, and can provide me the value of \$30, \$10 or \$40. If I choose the one with \$10 then,...
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332 views

Did I calculate maximum price of machine correctly?

Problem: A firm wants to buy a machine for its factory. It will work for two years. During the first year it will yield 240 thousand roubles and during the second year it will yield 200 thousands ...
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786 views

Does Average Total Cost (ATC) include implicit opportunity costs?

Does the average total cost include opportunity costs? If so, are these opportunity costs considered fixed costs or variable costs? How are they calculated.
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Does Game theory consider opportunity cost?

Morton Davis in his book Game Theory: A non-Technical introduction brings the following example of a non-zero sum game (pg.73) : A Buisness Partnership A builder and an architect are jointly offered ...
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Question on an argument in "The Myth of Absolute Advantage"

Brandis (1967) argues that "absolute advantage does not exist" and "that it is a logical impossibility". (See also comment, comment, reply.) My question here is very narrow and specific. I do not ...
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How to analyze small human activities from the economical standpoint?

If a company has project A and project B it can decide what is more profitable. The math in this example is straightforward. If human has activity A and activity B, how can someone calculate what is ...
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410 views

Is opportunity cost market prices of input goods or income from alternative investments?

Reading my development economics textbook, I was informed that the opportunity cost of a private investment is the market value of the wages, goods and services used for the investment. Here's a ...
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118 views

What would make a restaurant offer all-day breakfast?

Some restaurants particularly fast food ones offer breakfast food only during, well, breakfast hours. Other restaurants however offer breakfast food throughout their opening hours. Some restaurants ...
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199 views

Have any economists ever argued that the notion of opportunity cost should be done away with?

I hold the opinion that the notion of opportunity cost "muddies the intellectual waters" so to speak, and I'd like to know if any professional economists have expressed this sentiment, or similar. ...
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Piracy/File sharing - Why aren't songs, movies or ebooks given for free (+ads) like TV?

Question: Why aren't songs, movies or ebooks given for free (+ads) like TV? i. Sub-question: Every minute, people are pirating, and there is no stopping that. If people see 0.99 for a song on iTunes ...