Question

ancauy spemt anu do not have any consequence onjdecision making. 2.9. An opportunity cost is associated with using a resource in one activity instead of another.

Answer 1

Answer) Given question has a statement 'An opportunity cost is associated with using a resource in one activity instead of another',we will see how with concept and help of example we can interpret this statement.Answer is divided in following 3 parts

1. What is opportunity cost
2. Concept and interpretation of statement
3. Example

1. What is opportunity cost

Opportunity cost is the cost one incur when they let go of one alternative in favor of another,in other words it is equal to potential gain one has sacrificed by not choosing the alternative with which this gain is associated in favor of another.

2.Concept and interpretation of statement

Opportunity cost is associated with concept of trade offs in economics,one must choose from given options and even if someone chooses the best option they will incur opportunity cost of not going for second best option,opportunity cost is also associated with choosing resources for a particular activity as stated in question,it simply means one could invest their resource be it money,time,labor in other activity than the one they invested in it.Potential gain or output one could have received by investing resources in the activity it did not invest in is equivalent to opportunity cost.

3.An example

Imagine you are working as a salaried employee,at the end of month you received $10000 as your salary,now you have two options,one to invest in share x 's monthly options(an instrument in share market) or buy a new smartphone,you decided to go for smartphone,so you decided to invest your resource that is your money in smartphone,now company x got a new order and its option skyrocketed and reached twice its original value,your investment would have been doubled,the opportunity cost for you is $10000.

Answer is complete.Thank you!!