Decision making by individuals and firms - Costs, Benefits , and Profits - Making either or decisions
3 important questions on Decision making by individuals and firms - Costs, Benefits , and Profits - Making either or decisions
How do we describe an "either or" decision
Is a chaise between two activities in which we could deploy our capital on.
What are the most common mistakes with "either or" decisions
People fail to take into account their implicit cost of using self owned capital and not realizing their next best alternative
What do business owner fail to calculate
- They fail to calculate the opportunity cost of the owner's time in running a business
- often underestimating their opportunity cost and over estimating their economic profit of staying in business
- so they always assume that what they are doing is most beneficial by staying in business.
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