History[ edit ] The term was first used in by Austrian economist Friedrich von Wieser in his book Theorie der gesellschaftlichen Wirtschaft  Theory of Social Economy. Opportunity costs in production[ edit ] Explicit costs[ edit ] Explicit costs are opportunity costs that involve direct monetary payment by producers. The explicit opportunity cost of the factors of production not already owned by a producer is the price that the producer has to pay for them. Implicit costs[ edit ] Implicit costs also called implied, imputed or notional costs are the opportunity costs that are not reflected in cash outflow but implied by the failure of the firm to allocate its existing owned resources, or factors of production to the best alternative use.
Though, opportunity cost is just one of these topics and you will mostly likely to have only 1 or even 0 questions in your exam, it is indeed an important concept in the real world project management world to help you select the best course of actions to achieve the best value return.
What is Opportunity Cost? Since there are limited resources such as human, time, money, etc. Opportunity cost is a concept to help you judge which project s to take and which project s NOT to take based on the relative potential returns of the project s.
The potential return of the second best project that was not selected. The difference between the potential return of the project selected and the potential return of the second best option that was not selected.
The difference between the present value of cash inflows and the present value of cash outflows. The correct answer is B. Opportunity Cost is the potential return of the second best option that was not selected. It is also not the difference between the present value of cash inflows and the present value of cash outflows as that is the definition of net present value.
What would be the opportunity cost of selecting Project B over Project A?May 27, · Best Answer: The "opportunity cost" is the way you described it, what you have to give up, to make an economic choice, like go to a concert for entertainment.
Total costs are the price of ticket $35, plus driving costs, $20, which together total $ Personally, I'd have included the lost wages too Status: Resolved.
The opportunity cost of a choice is what you gave up to get it. If you have two choices - either an apple or an orange - and you choose the apple, then your opportunity cost is the orange you could have chosen but didn't.
You gave up the opportunity to take the orange in order to choose the apple. Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone (that is not chosen).
It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices.
The cost of doing something, like studying, in terms of whatever you gave up to do it is the opportunity cost. The opportunity cost of an hour spent studying economics is two episodes of your.
2. All of the following are examples of opportunity cost except: A. the leisure time sacrificed to study for an exam. B. the tuition fees paid to a university. The opportunity cost of selling is giving up a perceived higher valued sale.
Later in the day when there are few potential customers on the street, selling at a low price would not be perceived to be giving up the same higher valued sale.