what is opportunity cost with example

what is opportunity cost with example Opportunity cost examples involve any scenario requiring the individual or business to determine what value a decision requires them to miss What is an opportunity cost Opportunity cost is the value of what may lose when making a decision It involves both implicit and explicit costs

For example if you wish to accept a job that pays 35 000 per year and leave your current job that pays 32 000 annually the opportunity cost can be as follows Opportunity cost 32 000 35 000 Opportunity cost 3 000 This means you may lose 3 000 if you stay at your current job A student spends three hours and 20 at the movies the night before an exam The opportunity cost is time spent studying and that money to spend on something else A farmer chooses to plant wheat the opportunity cost is planting a different crop or an alternate use of the resources land and farm equipment

what is opportunity cost with example

what is opportunity cost with example
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Opportunity Cost Formula Calculator Excel Template
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Verified by a Financial Expert Updated January 10 2021 What is Opportunity Cost Opportunity cost is the return on an investment opportunity you missed out on compared to the return on the investment that you chose To determine what was lost or gained opportunity cost may be calculated as a number or a ratio Opportunity costs are expressed in terms of how much of another good service or activity must be given up in order to pursue or produce another activity or good For example when you head out to see a movie the cost of that activity is not just the price of a movie ticket but the value of the next best alternative such as cleaning your room

For example cost may refer to many possible ways of evaluating the costs of buying something or using a service Friends or newscasters often say It cost me 150 to buy the iPhone I wanted Definitions and Basics Opportunity Cost For example assume a firm discovered oil in one of its lands A land surveyor determines that the land can be sold at a price of 40 billion A consultant determines that extracting the oil will generate an operating revenue of 80 billion in present value terms if the firm is willing to invest 30 billion today

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Opportunity Cost Forgone Option Chosen Option When it comes to investment returns you ll just need to sub in the expected rates of return of each option Another example of opportunity cost at government level is the effects of the Covid 19 pandemic Governmental responses to the COVID 19 epidemic have resulted in considerable economic and social consequences both implicit and apparent

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What Is Opportunity Cost
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