AuthorTopic: economics page 126 q3
indrasenareddy
@2010-09-06 03:05:09
Can some one expalin this one. please.

It is mentioned that opportunity cost of operating the machine is 0. How is this inferred.

Net economic profit = 50,000. ( iam not getting how is it arrived)
Chebum
@2010-09-10 09:26:53
It says "the machine...has no alternative use" which is another way of saying there is no opportunity cost because by definition opportunity cost is the amount you could earn from the best next alternative. In this case the alternative is 0 so there opportunity cost. Therefore 650000 (annual revenue) - 600000 (cost) = 50000

CFA Discussion Topic: economics page 126 q3

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