A community for students.

Here's the question you clicked on:

55 members online
  • 0 replying
  • 0 viewing


  • 3 years ago

How do you calculate opportunity cost

  • This Question is Open
  1. anonymous
    • 3 years ago
    Best Response
    You've already chosen the best response.
    Medals 0

    Opportunity cost is the cost of the alternative which could have been chosen. In case of a building, the money earned by renting it to someone else rather than use it yourself is an example. The opportunity cost is the resulting value when we take accounting profit and remove opportunity cost from it. To explain the building example, assume revenue from business is $10,000 and the cost of business is $8,000. Assuming $500 goes in taxes, we are left with $1,500 in accounting profit. If we could have rented the building for $2,000 then we are left with economic profit of $1,500 - $2,000 which is -$500 which tells us we should have rented the building out rather than run the business. Always aim for positive economic profit. In the same example above, if the rent is anything less than $1,500 we should have run the business and at exactly $1,500 rent we are indifferent to either choice.

  2. Not the answer you are looking for?
    Search for more explanations.

    • Attachments:

Ask your own question

Sign Up
Find more explanations on OpenStudy
Privacy Policy

Your question is ready. Sign up for free to start getting answers.

spraguer (Moderator)
5 → View Detailed Profile

is replying to Can someone tell me what button the professor is hitting...


  • Teamwork 19 Teammate
  • Problem Solving 19 Hero
  • You have blocked this person.
  • ✔ You're a fan Checking fan status...

Thanks for being so helpful in mathematics. If you are getting quality help, make sure you spread the word about OpenStudy.

This is the testimonial you wrote.
You haven't written a testimonial for Owlfred.