Question

Opportunity costs and decision making: Explain opportunity costs and their importance to decision making at both the individual and organizational level in the economy. How do these decsions differ for the United States versus that of those decisions in the Chinese economy? What advise can the US lend to China to improve this area?

Answer 1

Opportunity cost of the chosen item or activity is the value of the best alternative that is forgone.However, the opportunity cost is subjective. For some it is higher and for some it is lower. It plays an important role in decision making both at the individual and organizational level for the economy. Both the individuals and firms prefer to take a decision where opportunity cost is lower. Because opportunity cost is opportunity loss.

In the case of opportunity cost it is not possible to compare the toe decisions in two different countries because the concept of opportunity cost is subjective. Opportunity cost might be high in the United States while low in China for the same decision. Thus, in this concept it is not advisable to compare these concepts as it depends on the nature of the economy and differs from nation to nation.