ECONOMICS
COST BENEFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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You could have gone out for Chinese food
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Eaten at home instead
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You could have gone to your friends house
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You will have consumed a lot of food
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Detailed explanation-1: -The opportunity cost of a choice is the next best alternative given up. For example, assume a person is choosing between pancakes and waffles for breakfast. If they choose pancakes, the enjoyment of eating waffles is the opportunity cost. It was the next best alternative (2nd choice) that was not selected.
Detailed explanation-2: -Opportunity Costs for Consumption If you decide to spend money on a purchase, then you forgo the opportunity to spend that money on other purchases.
Detailed explanation-3: -Opportunity Cost Example Deciding whether to spend a gift card on a strawberry smoothie or a banana smoothie. Deciding whether to spend $7 every morning on coffee or consistently invest that money in a retirement account. Deciding whether to invest capital in refurbishing equipment or in better employee training.
Detailed explanation-4: -The two types of opportunity costs are explicit opportunity cost and implicit opportunity cost.