Asked by Jordan Strickland on May 31, 2024
Verified
When a business has idle capacity and has two options to choose from that will maximise capacity, the potential benefit that is surrendered by choosing only one option is known as the opportunity cost.
Opportunity Cost
The value of the best alternative foregone as a result of choosing a different option.
Idle Capacity
Unused or underutilized resources and capabilities within an operation that could be employed to generate output.
- Appreciate the necessity of evaluating opportunity costs in the process of decision-making.
Verified Answer
ZK
Zybrea KnightJun 04, 2024
Final Answer :
True
Explanation :
Opportunity cost refers to the potential benefits an individual, investor, or business misses out on when choosing one alternative over another. In this context, when a business has to choose between two options to maximize capacity and selects only one, the benefits it could have gained from the other option represent the opportunity cost.
Learning Objectives
- Appreciate the necessity of evaluating opportunity costs in the process of decision-making.