An understanding of opportunity costs is important to understanding:
A) how to calculate the total revenue generated by a firm.
B) how to assess the economic profitability of a firm.
C) the tax liability of a firm.
D) how accountants calculate accounting profits.

Question

Quizplus · Accepted Answer

Opportunity cost refers to the cost of the next best alternative foregone while making a choice. Understanding opportunity costs is important in assessing the economic profitability of a firm as it helps in making decisions that maximize profits by considering the costs and benefits of different alternatives. It does not directly relate to calculating total revenue, tax liability, or accounting profits.

An Understanding of Opportunity Costs Is Important to Understanding