Business Choices

Question 1

Opportunity cost

Answer 1

when choosing between different alternatives, the opportunity cost is the benefit lost from the alternative you didn’t chose.

For example, if a business has to chose if opening a new shop (10 k) or increasing salaries (7 k) but they only have 11k to spend, so they have to chose.

Question 2

Non-monetary opportunity cost

Answer 2

There are some intangible benefits that can’t be measured.
Ex, if a business re-invests profits in training workers. Efficiency could increase (monetary) but motivation can also increase (non-monetary)

Question 3

Business choices and trade off

Answer 3

When making a decision you have to chose between 2 things, (chose one and sacrifice other).

Ex, if you want to expand you may sacrifice cash.

Question 4

Difference between trade off and opportunity cost

Answer 4

In opportunity cost, you give up/sacrifice something you want. Or is what you give up to get what you want.

Trade off is, giving up something to obtain another thing.

Question 5

Weighing trade offs

Answer 5

When business face trade offs this might help to find a balance:

• Obtain information: pros and cons of each option

• Balance short term with long term: analyze what you’re gonna gain/loose short & long term

• Measure support: Think about which key staff will support a particular idea and who will oppose it.