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Opportunity cost is the concept of ensuring efficient use of scarce resources, [25] a concept that is central to health economics. The massive increase in the need for intensive care has largely limited and exacerbated the department's ability to address routine health problems.
Comparative advantage in an economic model is the advantage over others in producing a particular good. A good can be produced at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. [1] Comparative advantage describes the economic reality of the work gains from trade for individuals, firms ...
The slope of the production–possibility frontier (PPF) at any given point is called the marginal rate of transformation ( MRT ). The slope defines the rate at which production of one good can be redirected (by reallocation of productive resources) into production of the other. It is also called the (marginal) "opportunity cost" of a commodity ...
The problem of allocation deals with the question of whether to produce capital goods or consumer goods. If the community decides to produce capital goods, resources must be withdrawn from the production of consumer goods. In the long run, however, [investment] in capital goods augments the production of consumer goods.
Opportunity cost can also be considered as the value of the resource in its next best use or next highest-valued alternative. Here are some examples to help better understand opportunity cost:
Economic rent is also independent of opportunity cost, unlike economic profit, where opportunity cost is an essential component. Economic rent is viewed as unearned revenue while economic profit is a narrower term describing surplus income earned by choosing between risk-adjusted alternatives.
Note the modest increase in average wages in the middle. In economics, the Baumol effect, also known as Baumol's cost disease, first described by William J. Baumol and William G. Bowen in the 1960s, is the tendency for wages in jobs that have experienced little or no increase in labor productivity to rise in response to rising wages in other ...
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