If the opportunity cost of manufacturing automobiles in the United States is lower than that of making airplanes in the United States, then the United States will import airplanes from Britain and export automobiles to Britain.
- The opportunity cost of a certain activity in microeconomic theory is the value or gain given up by engaging in that activity in comparison to engaging in an alternative activity. Simply put, if you choose one activity, you forfeit the potential to choose another.
- The law of growing opportunity cost argues that the opportunity cost increases each time the same decision in resource allocation is made. Explicit and implicit opportunity costs are the two forms of opportunity costs. The explicit opportunity cost has a monetary value.
- Opportunity cost is not directly reflected in a company's financial statements. Economically, though, opportunity costs remain quite substantial. However, because opportunity cost is a very abstract term, many businesses, executives, and investors fail to account for it in their day-to-day decisions.
Thus this is the meaning of opportunity cost.
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