Give an example of some action that has both a monetary and nonmonetary opportunity cost.
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Give an example of some action that has both a monetary and nonmonetary opportunity cost. |
Explanation
The opportunity cost is a forward looking consideration and thus, the actual rate of return for both options is unknown today. This makes the evaluation in practice to be tricky.
References
Understanding opportunity cost. (n.d.). Investopedia. https://www.investopedia.com/terms/o/opportunitycost.asp
Answer
Here, we consider an action that can be argued to have both monetary and non-monetary opportunity cost :
Assume that an employee chooses between two jobs, say job A and job B, without analyzing each job independently and Job A has a higher starting salary than job B. Here, choosing Job B over Job A involves a monetary cost . Since choosing Job A is more creative than choosing Job B, then choosing Job B equally involves a non - monetary cost.
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