is opportunity cost be zero?
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Opportunity cost can be zero in the case where there is no alternative available, say, for example, for a student there is no alternative for studying, here the student has to study either by hooks or by crooks. Therefore, in such cases where their are no alternatives available, theopportunity cost is zero.
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Trade-offs create opportunity costs, one of the most important concepts in economics. Whenever you make a trade-off, the thing that you do not choose is your opportunity cost. To butcher the poet Robert Frost, opportunity cost is the path not taken (and that makes all the difference).
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The opportunity cost of choosing the equipment over the stock market is (12% - 10%), which equals two percentage points. In other words, by investing in the business, you would forgo the opportunity to earn a higher return.
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Economic cost includes opportunity cost, unlike accounting cost, which only takes into account the amount of money spent. Economic cost is the accounting cost (explicit cost) plus the opportunity cost (implicit cost). Implicit cost refers to the monetary value of what a company foregoes because of a choice it made.
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Relevant costs may also be expressed as opportunity costs. An opportunity cost is the benefit foregone by choosing one opportunity instead of the next best alternative.
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Opportunity Cost of Capital. The difference in return between an investment one makes and another that one chose not to make. This may occur in securities trading or in other decisions. ... One way of conceptualizing opportunity cost is as the amount of money one could have made by making a different investment decision.
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Each choice made means another alternative has been forgone. A trade-off is isolating what that forgone alternative is, and opportunity cost involves calculating the cost of the trade-off. Trade-off and opportunity cost are therefore linked, with the former helping to calculate the latter.
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If there is no fixed cost, there will be no leverage. but the operating leverage will not be zero. Financial leverage gives an impact of fixed cost funds in the capital structure of the organization. Fixed cost of production will not impact the degree of financial leverage.
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Simply put, the opportunity cost is what you must forgo in order to get something. The benefit or value that was given up can refer to decisions in your personal life, in a company, in the economy, in the environment, or on a governmental level.
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Opportunity cost is a consideration in preparing a partial budget. ... For example if adopting alternative production technology reduces the amount of time the manager needs to commit to the enterprise, that reduction of labor is a positive impact and must be included in the analysis as a cost saving.
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While the cost of a good or service often is thought of in monetary terms, the opportunity cost of a decision is based on what must be given up (the next best alternative) as a result of the decision. Any decision that involves a choice between two or more options has an opportunity cost.
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Sunk Costs vs Opportunity Costs. ... Sunk costs are named so because they can't be recovered. Opportunity costs on the other hand are costs which do not necessarily involve any cash outflows but which need to be considered because they reflect the foregone profit that could have been elsewhere.
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A game is said to be fair if the expected value (after considering the cost) is 0. If this value is positive, the game is in your favour; and if this value is negative, the game is not in your favour.
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When the PPC is a straight line, opportunity costs are the same no matter how far you move along the curve. When the PPC is concave (bowed out), opportunity costs increase as you move along the curve. When the PPC is convex (bowed in), opportunity costs are decreasing.
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“The concept of opportunity cost is crucial to understanding individual choice because, in the end, all costs are opportunity costs. Sometimes critics claim that economists are concerned only with costs and benefits that can be measured in terms of money.
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The slope of the PPF represents the opportunity cost of moving from one combination of goods to another. The slope will always be NEGATIVE, because there is a trade off between the two goods, demonstrating the principles of scarcity and opportunity cost. ... This means the opportunity cost is also CONSTANT.
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Difference Between Trade-off and Opportunity Cost. ... While a trade-off denotes the option we give up, to obtain what we want. On the other hand, the opportunity cost is the cost of the second best alternative given up to make a choice.