opportunity cost

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September 9, 2020 at 4:56 pm #584418
Noah098
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sir i want to understand why the following statement is true?

“opportunity cost is represented by the foregone potential benefit from best rejected course of action.”

sir should not it be second best rejected course of action? Because the ‘best’ one would actually have been selected, so what would have been foregone could only be second best.

Your response would be much appreciated!
September 9, 2020 at 6:10 pm #584476
John Moffat
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The statement it true.

For there to be an opportunity cost in the first place then we must be rejected a course of action. It is the best course of action that will have been rejected (assuming of course that it is then worthwhile doing what we are considering).
September 9, 2020 at 6:12 pm #584480
Noah098
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so are you suggesting that we always make inefficient decisions, by forgoing the best course of action?
September 9, 2020 at 6:19 pm #584485
John Moffat
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Not at all.

We will only forego the best course of alternative action if what we are proposing is better. It is the benefit of the best course of action that will be lost if we continue with the new proposal.

Have you watched my free lectures on this?
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