Opportunity costs


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Opportunity costs

The difference in the actual performance of a particular investment and some other desired investment adjusted for fixed costs and execution costs. It often refers to the most valuable alternative that is given up.

Opportunity Cost of Capital

The difference in return between an investment one makes and another that one chose not to make. This may occur in securities trading or in other decisions. For example, if a person has $10,000 to invest and must choose between Stock A and Stock B, the opportunity cost is the difference in their returns. If that person invested $10,000 in Stock A and received a 5% return while Stock B makes a 7% return, the opportunity cost is 2%. One way of conceptualizing opportunity cost is as the amount of money one could have made by making a different investment decision. Importantly, opportunity cost is not a type of risk because there is not a chance of actual loss.
References in periodicals archive ?
We chose this formulation rather than letting the firm choose Installed capacity because analysis of this intermediate model highlights the trade-off between the opportunity costs of having too much vs.
Therefore, using this building for a community center entails an opportunity cost of $2.
Another method used to find the goodness of fit for the E-V approximation is Simaan's (1986) Opportunity Cost Approach.
Market prices, opportunity costs, and income effects.
The CVM might be used to obtain opportunity costs of time, which in turn might be combined with travel cost data to estimate consumer's surplus associated with recreation in the normal manner.
Citation: "Neglect of Opportunity Costs in Consumer Choice," Shane Frederick (MIT), Nathan Novemsky (Yale), Jing Wang (Yale), Ravi Dhar (Yale), Stephen Nowlis (Arizona State).
I thank an anonymous referee, David Colander, Avi Cohen, Rod O'Donnell, Bill Polley, Shane Sanders, Paul Ferraro, James Lake, Viplav Saini and participants in the AEA CTREE session "Why are opportunity costs still controversial?
The opportunity cost of debt and equity as based on the price of alternative financial assets and rates of interest.
Given the opportunity costs, it is in the national interest to assist minority business to become a viable business sector.
A further percentage add-on was applied to all scores for codes within a given specialty based on the amortization of opportunity costs associated with differential lengths of residency training over differential expected practice lives of such specialists.
Contracting and legal costs, including the monetary and opportunity costs involved in contracting, renegotiating or vendor dispute settlements.

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