Question

The opportunity cost of making a component part in a factory with no excess capacity is the: (CMA adapted)

Answer 1

Answer:

Answer Choices

The opportunity cost of making a component part in a factory with no excess capacity is the

(A) Variable manufacturing cost of the component.

(B)  Fixed manufacturing cost of the component.

(C)  Cost of the production given up in order to manufacture the component.

(D)  Net benefit given up from the best alternative use of the capacity.

Answer is D

Net benefit given up from the best alternative use of the capacity.

Explanation:

When we talk about opportunity cost, we simply look at the potential benefits a business, investor or person could miss when selecting a particular alternative over another. This is a major concept in economics.

If one is not careful, opportunity costs can be readily overlooked and when one tries to understand the missed opportunities in choosing one option over another, that individual would be able to make better decisions.