If a country can produce a maximum of 12,000 jumbo airliners or 2,000 aircraft carriers, then for each aircraft carrier, the country would be forced to give up (Opportunity costs) 6 jumbo airliners (12000/2000).
What is Opportunity Cost?
Opportunity costs are the possible advantages that a person, investor, or company forgoes while deciding between two options. Opportunity costs are by definition invisible, making it simple to ignore them. Making smarter decisions requires an understanding of the possible opportunities lost when a company or person selects one investment over another.
Opportunity cost is a wholly internal expense that is only utilized for strategic consideration; it is not included in accounting profit and is not reported externally. The determination of a company's capital structure involves opportunity cost analysis in a significant way.
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