Managers Should Generally Consider Opportunity Costs Both in "Keep or Drop

question 104

Multiple Choice

Managers should generally consider opportunity costs both in "keep or drop" and in "make or buy" decisions. Which of the following is an opportunity cost they should consider in both situations?

• A) Avoidable fixed costs
• B) Benefits from alternate uses of released capacity
• C) Amortization on new machinery
• D) Market share

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Definitions:

Marginal Benefit

The extra enjoyment or benefit derived from acquiring or generating another unit of a product or service.

Total Benefit

The complete gain or value derived from consuming a good or service, encompassing all individual benefits.

Lane Costs

Lane costs refer to the expenses associated with the transportation and logistics of goods along specific routes or lanes in a supply chain.

Marginal Benefit Curve

A graphical representation showing how the benefit from producing one more unit depends on the quantity that has already been produced.