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The concept of Opportunity Cost is not used in order to net the direct benefit of a choice, but in order to compare it to the direct benefit of alternative choices. How do we go about using it in Economics? 1) We gather all available alternative choices, say $A, B, C$ 2) We measure (in whatever way appropriate for the situation) the benefit from each ...


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It's called a Principal-Agent Conflict. The RIAA/MPAA act as agents on behalf of the people who actually produce content (and consequently end-consumer value). To maintain relevance to their principals', the RIAA/MPAA must signal value to them (i.e. claim loudly and repeatedly that they do something good for them [regardless of the validity of that claim])...


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The simple answer is that they don't think they would make as much money. In many countries illegally downloading music or movies is getting harder and harder. The recording industry has achieved this by persuading governments to instruct the ISPs to block torrent sites, torrent proxy sites and sites that list proxy sites completely so no one can access ...


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Opportunity cost is simply the value not obtained of the highest value alternative. It can be positive or negative; meaning it doesn't really make sense to define the opposite as opportunity profit. There is only two ways to go about it rationally, either you are profiting from doing something, or you are not profiting by not doing something, which is ...


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In economics, we argue that there is only one correct way to think of costs. And so, the adjectives economic or opportunity in front of the word cost are actually superfluous — the terms cost, true cost, economic cost, and opportunity cost are all exact synonyms. Note. If they are superfluous, then why do we use these adjectives? One reason is to strongly ...


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Firstly there are services like this in Spotify, and even radio and tv, but it sounds like you are talking about downloading the material with ads in. That causes a problem. Revenue from ads relies on giving many ads to many people. Each time you listen to a song the provider needs to be able to provide a new ad. If you download a song or book with ads ...


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Recall that Oppurtunity Cost is referred to the benefit forgone by choosing the other option. In your example of a single player game, opportunity cost exists since the architect is completely in control of the benefit he receives. In this case the opportunity cost for signing the contract is 0 (and conversely -40 for not signing the contract). However ...


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A useful framework for analysing personal activities involving both monetary and time costs is a household production model. A simple example of such a model (adapted from Chiappori & Lewbel (2015) pp 411-2) is below. Note that a "household" could be one person (the assumption that members of a multi-person household cooperate to maximise their joint ...


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The market value of the inputs are determined by the most lucrative possible investment opportunity. Yes, the concept of market value is a simplification. If your firm alone can make the investment then the market is not functioning in a competitive way and hence is unable to assign prices in an informative way. If other firms cannot make the same investment ...


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Definition. The opportunity cost (OC) of any alternative is the value you place on the best of the forgone alternatives. If we adopt the above definition (and I do), the OC of $B$ is the value of $A$, which is simply $\$100$. With the above definition, the alternative you choose ($B$ in this case) is completely irrelevant when calculating its OC. All that ...


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Keat is mistaken. Most economists agree with Mankiw. The term oppportunity cost includes all costs, including explicit out-of-pocket ones and any other implicit ones. As Henderson states: The word “opportunity” in “opportunity cost” is actually redundant. The cost of using something is already the value of the highest-valued alternative use. But as ...


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First off some terminology: opportunity cost are not necessarily avoided profit. Profit is a term that is used for firms, but opportunity cost does not just apply to firms. Moreover as @clinical coder points out the opportunity costs are not avoided profits but the value of the best alternative forgone. For certain firm decisions that may be forgone profit, ...


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Opportunity costs occur for all suppliers. The lowest price at which supply occurs (agents willing to sell) is just above the lowest opportunity cost of the suppliers. I would not describe it as a point on the supply curve. Because you will not offer something for sale unless it is greater than you opportunity cost. It is important to note that opportunity ...


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Probably the most useful aspect of the concept of "opportunity cost" is to distinguish between choice problems where a particular choice is available, but the alternatives differ. The concept of opportunity cost stresses that when we make a choice of some action, we forego alternatives, and so the gain from that action is the difference between the benefit ...


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As other answers clarified, the Opportunity Cost has been defined as the value of the best alternative foregone. Assume that the gain in activity B will be positive, say USD 20. This too does not affect the Opportunity Cost, it does not make it equal to $100-20 = 80$. In other words, the Opportunity Cost does NOT reflect the "net change of financial ...


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Opportunity cost is what you forgo for choosing something else. Commonly thought of in economic terms as follows: Opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action. Stated differently, an opportunity cost represents an alternative given up when a decision is made. This cost is, therefore, ...


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The opportunity cost of any decision is the value of the next-best alternative forgone. So in this case, if you choose \$40, your opportunity cost is \$30, because that's the value of the next-best alternative forgone. (Implicit assumption: These are your only three alternatives and you must choose one of these three.)


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The thing you are missing in your calculation is that the roubles the machine produces in year 1 are more valuable than those in year 2. Think about 2 different machines with different production schedules Machine 1 - 440 roubles year 1, 0 in year 2 Machine 2 - 0 in year 1, 440 in year 2 Using your calculation the value of both of those machines would be ...


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Interesting! My guess is that: A) Fast food places are in the business of solving the masses nutricional needs (low margins!), while other restaurants are more in the business of selling a special experience that you could do without (high margins!): Article mentioning lower margin breakfast foods. B) Because of the above, people will go to a fast food ...


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This question makes a hidden assumption: that all diners are on the same circadian rhythm. A significant portion of the US population works nights, spans time zones, etc. For example, truckers. That's one answer, that addresses the market. There's also the question of inventory logistics for the restaurant. Most eateries have to do extensive prep for a ...


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Isn't this mostly an issue of pricing at a level where most people feel it's worth paying to avoid the hassle (and potential legal issues) of piracy? Take music singles for example: when I was a teenager (late 90's), a CD single cost £3.99 in the UK. When it became possible to download songs for free that someone else had ripped and uploaded, many people ...


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