Per-Unit Opportunity Cost
Definition
Per-Unit Opportunity Cost refers to the cost of choosing one alternative over another, measured in terms of the next best alternative forgone per unit. It represents the trade-off between two options.
Analogy
Imagine you have $10 and you can either buy a movie ticket for $5 or a burger for $3. The per-unit opportunity cost of buying the movie ticket is 2 burgers ($5/$3), meaning that for every movie ticket you buy, you are giving up the opportunity to have 2 burgers.
Related terms
Comparative Advantage: Comparative advantage refers to the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than others.
Trade-offs: Trade-offs are choices made by individuals, firms, or countries when they give up one thing in order to gain something else.
Marginal Cost: Marginal cost is the additional cost incurred from producing one more unit of a good or service.
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- How is per-unit opportunity cost determined?
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