Opportunity cost is a better measure of the true costs faced by firms than accounting costs.

Question

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Accounting costs only take into account the monetary expenses a firm incurs, but opportunity cost also includes the value of the next best alternative that the firm could have pursued instead of the chosen option. Opportunity cost gives a more comprehensive view of the true costs of a decision, as it considers both the explicit and implicit costs.

Opportunity Cost Is a Better Measure of the True Costs