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Opportunity cost is the value of the best alternative forgone when a choice is made between several mutually exclusive alternatives. Learn about explicit, implicit, sunk and marginal costs, and how they affect economic decisions and efficiency.
Economic rent is any payment or benefit for a fixed or scarce factor of production or resource, such as land, patents, or labor. Learn about the different concepts and theories of economic rent in neoclassical and classical economics, and how it differs from economic profit and contract rent.
The sacrifice in the production of the second good is called the opportunity cost (because increasing production of the first good entails losing the opportunity to produce some amount of the second). Opportunity cost is measured in the number of units of the second good forgone for one or more units of the first good. [4]
Opportunity cost is also often defined, more specifically, as the highest-value opportunity forgone. So let's say you could have become a brain surgeon, earning $250,000 per year, instead of a ...
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:
A book by Keynes published in 1936 that challenged the classical economics orthodoxy and introduced the concepts of effective demand, liquidity preference and the multiplier. It argued that the level of employment is determined by the level of aggregate demand, not by the price of labour, and advocated government intervention in economic policy.
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 gains from trade for individuals, firms, or nations, which arise from differences in their factor endowments or technological progress. [2]
Deadweight loss is the loss of societal economic welfare due to production/consumption of a good at a quantity where marginal benefit does not equal marginal cost. Learn about the causes, examples, and measures of deadweight loss, and how it affects consumer and producer surplus.