Production Possibility Curve under Constant and Increasing Opportunity cost and the production possibilities curve.
Constant opportunity cost is a situation in which the costs of pursuing a particular opportunity does not increase or decrease over time, even if the benefits derived from the activity should change.When describing a production process in which the costs associated with producing goods and services remain the same while still allowing higher production levels to be obtained, the term is often used.If the cost of using additional resources to produce more goods does not lead to a decrease in cost per unit produced, then it's not worth it.
The relationship between the costs and the number of units produced is the same with constant opportunity cost.This is different from situations in which the opportunity cost decreases, such as when a manufacturer is able to obtain discounts by ordering more raw materials to be used in the production of additional goods, which leads to a lower production cost per unit and presumably more profit perunit as the goods are sold.Increased opportunity cost, in which the effort to produce additional goods actually results in increasing the average cost of production on each unit produced, is a situation that will sometimes discourage the creation of additional units.
The idea of constant cost opportunity can be related to other types of business and financial situations.If a manager needs to fill a position within a department and has the option to offer the position to an existing employee with the same level of experience and expertise as the person who recently left that position, this would mean the company would incur no additional expense.If the job was offered to a new employee who lacked the experience, this would mean devoting additional resources to train the individual, which in turn would not keep the opportunity cost associated with the task at a constant level.
Determining that a certain activity can be managed with a constant opportunity cost may be an indication that it is in the best interest of the company to move forward with that activity, rather than choosing an approach which would actually mean greater expense without creating a corresponding increase in benefits.In order to determine if this state actually exists, it is important to identify every cost as well as every advantage or benefit derived from the activity, then project any increases in benefits that would be achieved.The strategy may not be in the best interests of the company or individual considering the activity if the benefits do not justify the additional expense.
Michael decided to become a full-time writer after many years in the teleconferencing industry.His work has appeared in poetry collections, devotional anthologies and several newspapers since then, and he has contributed articles to a variety of print and online publications.Malcolm collects vinyl records, minor league baseball, and cycling.
Michael decided to become a full-time writer after many years in the teleconferencing industry.His work has appeared in poetry collections, devotional anthologies and several newspapers since then, and he has contributed articles to a variety of print and online publications.Malcolm collects vinyl records, minor league baseball, and cycling.
There would be additional costs associated with filling a new position with an existing employee, although they may not be as high in every circumstance.Most of the time, existing employees are not going to move between jobs.They are more likely to move to jobs with more responsibility in order to get more money.It is possible that the company will need to hire a new employee to fill the position that was left behind.