ii Consider the definition of opportunity cost What was the

(ii) Consider the definition of opportunity cost. What was the last major decision you made and how did you assess your opportunity cost?

Solution

Opportunity cost can be defined as the production of output which is given up for producing some additional units of another output. In other words, it can be said that what is given up for choosing next best alternative activity.

For example, if individual A has two earning the opportunity. 1 if he chooses to work as an employee in a factory, he will receive $10,000 per month or he can choose to work as a driver where he gets $9000 but in this job he is happy because he loves driving. So if he chooses out of these two options, the job of driving. In this case, he has lost $10,000 for the job of driving where he gets only $9,000 per month but he loves this job.

Hence his opportunity cost is $10,000 for choosing the next best job of driving.