There are two types of opportunity costs:

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External ones are those that arise during the execution of business activities. Example: purchase of raw materials, wages of employees and rent of production facilities.
Internal - costs that arise in the process of using resources that belong to the organization itself. For example, if a company uses its machines to make one type of product, it loses the ability to use them to make another product.


Errors in calculation
Errors in calculating the AC can cause financial cambodia whatsapp phone number losses, but knowing the possible pitfalls, they can be avoided.

Considering only one aspect . For example, focusing on the difference in the price of a product. A more expensive product may also provide higher demand, which will lead to higher profits in the long run. Not paying attention to the full picture may lead to losses.

Ignoring the seasonality of your business . If you don't take into account the changes in demand for a product at different times of the year, you may mistakenly assume that a certain product will always sell well. This will lead to excess inventory and the cost of carrying unnecessary stock.

Not taking into account the cost of time . If an entrepreneur spends a lot of time selling a more expensive product, he misses the opportunity to sell the cheaper version twice and earn more income.

Risk of overinvestment . Another common mistake is choosing several options at once and not developing a business plan well enough. Inspired by the idea, entrepreneurs take out loans and accumulate debts without understanding how this will affect their financial situation. As a result, the business is overloaded and there is a risk of ending up in the red.



Cost curve
The opportunity cost curve or production possibility curve (PPC) is a tool that allows you to analyze the efficiency of using a company's resources.

The diagram shows the marginal production volumes of two types of products. In our case, these are goods X and Y with a shortage of resources.

An important aspect that the CPP emphasizes is that every action taken to increase the output of one product entails a decrease in another.


Let's say a company produces products X and Y. The X-axis on the graph is the quantity of product X, and the Y-axis is the quantity of product Y.


The maximum amount of output that a firm can produce is reflected by the extreme points of the graph: X max and Y max.

Point A illustrates a situation where the company produces 8 units of product Y and only 1 unit of product X.

If the firm decides to increase production of good X to 2 units (point B), it will be forced to decrease production of good Y to 4 units.

The graph clearly demonstrates the concept of opportunity cost: every decision has a cost, and in this case the company is sacrificing a certain amount of good Y to increase production of good X.