Example of Zero Opportunity cost

Example of Zero Opportunity cost

Opportunity cost exists only where there is alternative use of resource, in case there is no use of available resource then opportunity cost is deemed to be nil.

Example of opportunity cost with no alternative use

Mr. A is a skillful labor is paid at a rate of $ 50 and charged to the customer at the rate of $ 80. Company has got a job where A may be deputed for 10 hours. What would be charging rate for the job where there is no other job is available to depute him.

Solution

In this case there is no alternative use is available for Mr. A and therefore he would be charged to project at actual rate instead of opportunity cost. The opportunity cost in this case is nil

Labour ( 10 X $ 50 ) = $ 50