Topic 1 DQ 1 .docx - Explain why the consideration of...

Explain why the consideration of opportunity costs may be very relevant to a firm. How can
opportunity costs affect a business decision? Use an example to support your answer.
Opportunity cost refers to the value one may have received but given up in pursuit of another
option (Khan, n.d.). When making business decisions it is important for managers to consider
the opportunity cost to maximize efficiency, production efforts, and marginal revenue. By
measuring the production possibilities frontier, the firm may be able to determine which
decision will result in the greater value ensuring the most beneficial outcome for the company.
For example, should a company need to decide on which customer relationship management
system will be most beneficial for their employees the company will need to consider the value
lost or opportunity cost by selecting one system over another. All other factors being equal,
should the firm select Option 1 over Option 2, although they are getting the management