The concept of opportunity costs is based on recognizing that a firm's financial resources are finite.

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Opportunity costs refer to the cost of the best alternative forgone in making a decision, and this concept is based on the recognition that a firm's resources, including financial resources, are limited or finite. Therefore, to make the best use of these resources, a firm must consider the opportunity costs of alternative uses of its resources in making decisions.

The Concept of Opportunity Costs Is Based on Recognizing That