Answer to Question #229843 in Economics of Enterprise for indi

Question

A sports collector is considering the purchase of either a hockey jersey or a baseball that was struck for a home run. If the collector chooses to purchase the jersey, what is the opportunity cost?

Answer 1

Opportunity Cost

The potential gains that an individual, investor, or organization misses out on when choosing one option over another are referred to as opportunity costs. Opportunity costs are easy to miss since they are invisible by definition. It's easier to make smarter decisions when you know what opportunities you're missing out on by choosing one investment over another.

The formula of calculating opportunity cost is ;

opportunity cost = return on option not chosen - return on options chosen

In the case scenario given; the sport collector will gain in choosing hockey jersey over the baseball, this is because jersey is considered as an important tool in a baseball game, additionally purchasing of jersey will be in large quantiles since each player must have one, unlike the baseball where all player uses one baseball.

Hockey is essentially a game of skill. Despite the fact that it is not as physically demanding as rugby or wrestling, players must display agility on the field in order to excel. The uniforms worn by the players, as in any other outdoor sport, have a significant impact on their performance on the field. When it comes to choosing hockey uniforms, the importance of comfort cannot be overstated. The incorrect fit (of the players' jerseys) can cause far more harm than one can anticipate. Consider a player who is attempting to score a goal with a big hockey stick but is unable to do so because the jersey sleeves have become a stumbling block.

References

Otto, A. R., & Daw, N. D. (2019). The opportunity cost of time modulates cognitive effort. Neuropsychologia, 123, 92-105.

Weiss, L., & Kivetz, R. (2019). Opportunity cost overestimation. Journal of Marketing Research, 56(3), 518-533.