Question

Economists tell us that the true cost of a decision is opportunity cost. What is opportunity cost? What is the difference between opportunity cost and money cost? How are the two related? Why is opportunity cost considered as the true cost of a decision?

Answer 1

Opportunity cost means cost incurred by not enjoying the benefit associated with the best alternative choice,when an option is chosen from alternative. This play crucial role to ensure that scare resources are used efficiently.

Difference between opportunity cost and money cost-

Money cost means the cost of acquiring a product or service in available cash.

While opportunity cost is cost incurred by not enjoying the benefit associated with the best alternative choice.

Money cost and opportunity cost both are based upon monetary value.

Opportunity cost is to be considered true cost because it calculate the cost of not choosing particular option.hence it calculated comparative cost .