The Relevance of Opportunity Costs in Business

The Relevance of Opportunity Costs in Business
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The Relevance of Opportunity Costs in Business
The cost or value conferred on the next available option accessible to a corporate, business, or investor reflects the opportunity cost. The alternative that stakeholders skip and fail to select is the next choice. Hence, another option was chosen, with the expectation and prediction of it being more gratifying and productive (Karpac & Bastosova, 2020). In this context, opportunity costs assist entrepreneurs in deciding whether to make a product or continue offering a particular service. For instance, a car company may invest in electric vehicle (EV) manufacturing instead of making supercars. Thus, the costs the company could have directed to making supercars are opportunity costs. Karpac and Bastosova (2020) indicate that businesses compare the cost-benefit of pursuing a production activity against the cost-advantage of not following it. As a result, the firm may invest the sam...