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( Opportunity cost)
Africa&_160;· North America
South America&_160;· Asia
Europe&_160;· Oceania
Opportunity cost is a key concept in economics because it implies the choice between desirable, yet mutually exclusive results. It has been described as expressing "the basic relationship between scarcity and choice."[3] The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently.[4] Thus, opportunity costs are not restricted to monetary or financial costs the real cost of output forgone, lost time, pleasure or any other benefit that provides utility should also be considered opportunity costs. A person who invests $10,000 in a stock denies themselves the interest they could have earned by leaving the $10,000 in a bank account instead. The opportunity cost of the decision to invest in stock is the value of the interest. An organization that invests $1 million in acquiring a new asset instead of spending that money on maintaining their existing asset portfolio incurs the increased risk of failure of their existing assets. The opportunity cost of the decision to acquire a new asset is the financial security that comes from spending the money on maintaining their existing asset portfolio.
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Opportunity cost Subcategories
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