Question

Does opportunity cost get used when actually making the decision or deciding between options?

Answer 1

Opportunity cost is the benefits that one foregone when choosing the next best alternative. No matter what the decision whether it is to replace an old machine with a new one introducing a new product in the market. There will always be several options to choose from and several benefits of those options which have to be foregone in favour just one suitable alternative.

So it can be safely said that opportunity costs is used in deciding between decisions or making a decision. An appropriate example would be introduction of a new product in place of older one, in such case the new product will generate some income for the company but before deciding on whether to take up the product or not the company have to consider the margin foregone when the old product is discontinued and this margin foregone is the opportunity costs.