Opportunity Cost Flashcards
1
Q
Opportunity cost definition
A
Opportunity cost is what you give up or trade off to produce one additional unit. In this instance, it refers to the value of the goods you sacrifice in deciding to produce one good instead of another.
2
Q
Opportunity cost example
A
An easy example of opportunity cost would be if a farmer had 100 acres of land and had the option to sow it to crop or lease it out. Leasing it out he could make $150 an acre for it earning him $15,000 per year but he would have to forgo the potential income that could be made from cropping it. In his decision he factors time, maintenance required to block and the ability to ear $15,000 per year without having to do anything.
