When considering two different securities, it is also important to take risk into account. For example, comparing aTreasury billto a highlyvolatilestock can be misleading, even if both have the same expected return so that the opportunity cost of either option is 0%. That's because the U.S...
Economists even use the concept of opportunity cost to determine if people can benefit from trading with one another. Let’s look at a simple example – just two people, Bob and Ann, who produce just two goods, bananas and fish. Because of...
Here are some interesting opportunity cost examples that would definitely strengthen your grip on this simple yet rational economic concept! Before you sprint towards the opportunity cost examples provided in this article, it is essential that you understand the concept first. So,what is opportunity c...
Example of Opportunity Cost An executive’s stock options have just become vested. He must now choose one of two mutually exclusive actions. He can sell the options outright for $50,000 (the explicit cost) or convert them to 5,000 shares of his company’s stock at $10 per share. The ...
Opportunity Cost vs. Sunk Cost A sunk cost represents money spent. Opportunity cost represents money that could have been earned if the money was invested in a different way. Let’s assume that our inheritor (from the example above) chooses to purchase $15,000 of stock. That $15,000 is ...
C. The profit lost by not choosing another business opportunity. D. The cost of raw materials. 相关知识点: 试题来源: 解析 C。解析:机会成本是指由于选择了一种方案而放弃的其他可能方案中所能获得的最大收益。选项 A,广告花费不是机会成本。选项 B,市场调研的时间不是机会成本。选项 D,原材料成本也...
Example of opportunity cost Opportunity Cost vs. Sunk Cost Risks & Limitations of Thinking About Opportunity Cost Bottom Line When an investor is analyzing and comparing options, opportunity cost reflects the potential benefits that the investor gives up by electing against some of the options. Read...
The concept of opportunity cost is used in decision-making to help individuals and organizations make better choices, primarily by considering the alternatives. How opportunity cost works For a simple example, let’s say you opt to rent retail space in midtown Manhattan at the bargain price of ...
Give an example of how the Principle of Opportunity Cost applies to your life. Think of a recent decision you made. It could be a decision as simple as whether to eat out or cook your own dinner, or it could be a decision to quit your job and go back to s ...
An accountant would not count the owner’s opportunity cost of alternative employment as an accounting cost.An example is given in the text in which Helen runs a cookie business, but she could instead work as acomputer programmer. Because she's working in her cookie factory, she gives up th...