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12 November, 16:12

What is the opportunity cost (in civilian output) of a defense buildup that raises military spending from 4.1 to 4.5 percent of a $7 trillion economy?

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  1. 12 November, 19:35
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    In economics and investments, opportunity cost is the amount of money that a company could have gained, but lost because they took another course of action. This is especially applicable to situations wherein a company decides on which of the two events they would choose.

    In other words, opportunity cost can be the net gain or loss that a company obtains when upon getting to the decision. Suppose, we chose a spending of 4.5%, the opportunity cost would be:

    Opportunity cost = $7 trillion (4.5% - 4.1%)

    Opportunity cost = $7 trillion (0.004)

    Opportunity cost = $0.028 trillion or $28 billion

    Therefore, the opportunity cost is $28 billion.
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