If Mary can bake a cake at a lower opportunity cost than Sarah can, then Sarah has a comparative advantage in baking cakes.
The potential benefits that a person, investor, or business forgoes while choosing between two possibilities are known as opportunity costs. Opportunity costs can be easily disregarded since they are by nature invisible. Making smarter decisions requires an understanding of the possible opportunities lost when a company or person selects one investment over another.
Opportunity cost is the advantage that was lost because a particular option was not selected.
It is necessary to weigh the advantages and disadvantages of each choice offered in order to correctly assess opportunity costs.
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