What is marginal opportunity cost explain with the help of a numerical example?
Asked by: Lesley Powlowski | Last update: December 17, 2025Score: 4.9/5 (33 votes)
What is a numerical example of marginal cost?
Marginal cost is the added cost to produce an additional good. For example, say that to make 100 car tires, it costs $100. To make one more tire would cost $80. This is then the marginal cost: how much it costs to create one additional unit of a good or service.
What is marginal cost explain with an example?
Marginal cost includes all of the costs that vary with that level of production. For example, if a company needs to build an entirely new factory in order to produce more goods, the cost of building the factory is a marginal cost. The amount of marginal cost varies according to the volume of the good being produced.
What does the opportunity cost mean explain with a numerical example?
An opportunity cost is the value of the option not taken when a business makes a decision. For example, if the business is deciding whether to purchase two new tractors, the opportunity cost of not doing so would be the potential revenue and profitability lost by not being able to take on another project.
What is marginal opportunity cost with an example?
It can be defined as the number of units of a product which are not produced in order to produce extra units of a different product. Simply put, the expense of producing extra units of a product is the marginal opportunity cost. Assume a company producing chairs decides to manufacture tables using the same resources.
#2 Explain marginal Opportunity cost with the help of a hypothetical numerical example
What is marginal cost example math?
For example, if a company had produced 2 packs of juice earlier with a total cost of $12, and now it produces one extra unit, i.e. 3 packs of juice at a total cost of $15. So, the marginal cost of producing that 1 additional unit of juice pack can be calculated as ΔC/ΔQ, where ΔC = $15 - $12 = $3, and ΔQ = 3 - 2 = 1.
What is an example of opportunity cost?
When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can't spend the money on something else.
What is an example of opportunity cost in numbers?
Opportunity Cost = Return on Most Profitable Investment Choice - Return on Investment Chosen to Pursue. Opportunity Cost = $80,000 (selling ten cars worth $8,000 each) - $60,000 (selling 5 trucks worth $12,000 each) Opportunity Cost = $20,000.
What is the concept of marginal rate of transformation with the help of numerical example?
As an example, if baking one less cake frees up enough resources to bake three more loaves of bread, the rate of transformation is 3 to 1 at the margin. Or consider that it costs $3 to make a cake. Meanwhile, $1 can be saved by not making a loaf of bread. Thus, the MRT is 3, or $3 divided by $1.
What is the best example of opportunity cost?
Standard cost. Explanation: Opportunity cost is the best example of Standard cost. Opportunity costs represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.
What is marginal costing in your own words?
Definition: Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution. Marginal cost is the change in the total cost when the quantity produced is incremented by one.
What is the meaning of opportunity cost?
Opportunity cost is a concept in Economics that is defined as those values or benefits that are lost by a business, business owners or organisations when they choose one option or an alternative option over another option, in the course of making business decisions.
Which of the following best describes marginal cost?
Marginal cost is the additional cost incurred in the production of one more unit of a good or service.
What is the best definition of marginal cost?
Marginal cost refers to the expense of creating one more item for sale. It is most commonly used in manufacturing, where it's called the marginal cost of production. The marginal cost tells a business precisely how much more they have to spend to create one more product, or deliver a service one more time.
What is the numerical example of the marginal propensity to consume?
For example, if someone's income increases by $5,000 and their spending increases by $4,500, the calculation would be MPC = 4,500/5,000. For this brief example, the person's MPC would be . 9, or 90%.
How to calculate opportunity cost?
The formula for opportunity cost is: Opportunity Cost = Value of the Next Best Alternative / Value of the Chosen Option. In the context of a Production Possibilities Frontier (PPF), it's often expressed as the ratio of one good given up to produce an additional unit of another good.
What is marginal opportunity cost?
The marginal opportunity cost can be defined as the ratio of number of units of a good sacrificed to produce an additional unit of another good. It is also known as Marginal Rate of Transformation (MRT).
What is the concept of Mrs with numerical example?
What is the marginal rate of substitution with example? The marginal rate of substitution is the amount of one good that a consumer is willing to sacrifice in exchange for some amount of another good. For example, if a consumer is willing to give up 6 bananas in exchange for 3 apples, the MRS = -6 / 3 = -3.
Which is the best example of the marginal concept in economics?
Consider a manufacturing example where it costs $2 to make a good whose marginal revenue is $5. For this unit, the company makes $3. If the next unit costs $4 to make, the company still earns a marginal profit because marginal revenue of $5 is greater than the marginal cost.
What is opportunity cost example with the help of a numerical example?
If an economy can produce rice 2000 quintals of rice or 4000 quintals of wheat with the given resources and the economy chose to produce wheat then the opportunity cost will be 2000 quintals of rice which the economy has sacrificed.
How to calculate marginal cost?
A company's marginal cost is how much extra it costs to produce additional units of goods or services. You can calculate it by dividing change in costs by change in quantity.
What is opportunity cost real examples?
A student spends three hours and $20 at the movies the night before an exam. The opportunity cost is time spent studying and that money to spend on something else. A farmer chooses to plant wheat; the opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment).
What is importance of opportunity cost with examples?
Opportunity cost is important in several contexts, including: Business decisions: It helps self-employed individuals and companies choose between different projects or investments. Personal finance: It allows individuals to evaluate how to spend their time and money more effectively.
Which scenario is the best example of an opportunity cost?
The correct answer is a. A computer company produces fewer laptops to meet tablet demand. Opportunity cost defines the benefit obtained by having a commodity after forgoing some other commodity. In the problem statement, the computer company incurs an opportunity cost of laptops for tablets.
What is an opportunity cost & kid example?
Have two pieces of different candy or other fun food or snack that they can choose from. Let 'em pick! Tell them that the one they didn't pick is called “The Opportunity Cost.” Have them say it out loud! In other words, Opportunity Cost is the choice not taken.