What does opportunity cost mean?
The benefits foregone of the next best alternative
Opportunity cost applies to both time and money in business decisions.
What are the two most important resources for a new business?
- Money
- Time
Both resources have an opportunity cost associated with them.
Every business decision has an opportunity cost measured in _______ and _______.
- Time
- Money
Often, both time and money are involved in the opportunity cost.
What is a trade-off in business?
A compromise between two different alternatives
An example is the choice between paying dividends to shareholders and reinvesting profits.
When faced with trade-offs, what is one action that might help find the right balance?
- Obtain information
- Balance short term with long term
- Measure support
These actions can assist decision makers in evaluating their options.
True or false: Opportunity cost only applies to financial decisions.
FALSE
Opportunity cost also applies to time and other resources in decision making.
What should decision makers consider when weighing up trade-offs?
- Advantages and disadvantages of each choice
- Long-term vs short-term impacts
- Support from key staff
These considerations can influence the decision-making process.
