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What are the pros and cons of opportunity cost?

User Mpb
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2 Answers

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Final answer:

Opportunity cost has pros and cons. The pros include making informed decisions, efficient resource allocation, and forecasting trade-offs. The cons include subjectivity, difficulty in measuring, and limited perspective.

Step-by-step explanation:

Pros:

Helps in making informed decisions: By considering the opportunity cost of different alternatives, individuals can make more informed and rational decisions.

Encourages efficient resource allocation: Understanding opportunity cost helps in allocating resources more efficiently by evaluating the benefits and costs of different options.

Forecasts the potential trade-offs: Knowing the opportunity cost allows individuals to anticipate the trade-offs they might have to make in the future.

Cons:

Subjectivity: Opportunity cost is subjective as it varies from person to person based on their preferences and needs.

Difficulty in measuring: It can be difficult to precisely measure opportunity cost, especially when it involves non-monetary factors like time.

Limited perspective: Focusing too much on opportunity cost can narrow one's perspective and overlook other important factors in decision making.

User Mrahhal
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Answer:

Advantage 1: Awareness of Lost Opportunity.

Advantage 2: Relative Price.

Disadvantage 1: Time.

Disadvantage 2: Lack of Accounting.

User Todd Myhre
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