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Balancing Investments: Opportunity Costs and Economic Returns Explaine
Chapter 25, Problem 4(choose chapter or problem)
What is the opportunity cost of investing in capital? Do you think a country can overinvest in capital? What is the opportunity cost of investing in human capital? Do you think a country can overinvest in human capital? Explain.
Questions & Answers
QUESTION:
What is the opportunity cost of investing in capital? Do you think a country can overinvest in capital? What is the opportunity cost of investing in human capital? Do you think a country can overinvest in human capital? Explain.
ANSWER:Step 1 of 2
The term opportunity cost means an expense that can be recovered with the help of a better alternative in the present or the distant future. In simple terms, opportunity cost is the foregone benefit to get the next best choice. There is a loss of consumption when one invests in capital, an opportunity cost. That has resulted from redirecting resources towards investment.
A country could choose to invest in physical capital, such as machinery for a new factory, instead of using those funds to import goods for immediate consumption. The opportunity cost is the enjoyment and use of goods and services that citizens can't consume now because the resources are invested in the factory.
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Balancing Investments: Opportunity Costs and Economic Returns Explaine
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Learn about the intricacies of opportunity cost and its broader implications. Delve into the balance between human and physical capital, understanding the risks of overinvestment. Grasp the Law of Diminishing Marginal Returns and its effects on national strategies.