INTERNATIONAL BUSINESS 5
Conclusion on Spain absolute besides advantage its comparative advantage for trucks and boats
Inthe making of the boats and trucks, Spain takes an absolute advantageas compared to Portugal. It can produce numerous trucks and boatsthan its Portugal counterpart due to its efficiency in the productionof the goods (Bryan, & Morten, 2015). It is for this reason thatSpain employs lesser inputs in the production of the products. Fromthe table, 12 trucks or 3 boats can be produced by Spain. As aresult, four trucks (12/3) is the opportunity cost for every boat.For every truck, the opportunity cost translates to 0.25 (3/12) boatunits. On the other hand, two boats or six trucks can be produced byPortugal. Here three trucks or 6/2 trucks is the opportunity cost forevery boat, and 2/6 boats is the opportunity value for every truck(Levchenko, & Zhang, 2016). From the analysis above, it can beobserved that Spain has a lesser opportunity cost on the productionof trucks as compared to Portugal. It is for this reason that Spainhas the comparative advantage when it comes to trucks. Portugalpossesses a comparative advantage in the production of boats. Spainshould focus on the production of trucks while Portugal directs itsfocus on the boat production. On the international markets,specialization can help the two countries to achieve reasonablerates.
Whenit comes to tables and wine production, Italy has the absoluteadvantage. More wines and tables can be produced efficiently by Italyas compared to Greece. In the Italy case, the opportunity cost forone unit of wine is 0.2(200/1000) table units. Table opportunity costin the same country stands at 5 (1000/200) wine units. In Greececase, wine opportunity cost is 0.5 (100/200) tables, and that oftables is 2 (200/100) wines. Greece has a comparative advantage inthe table production while Italy possesses the same advantage in wineproduction.
Opportunitycost is the best-forgone alternative in the process of getting aparticular product. Other scholar defines it as the missedopportunity by its value. Every resource in the world has varietyuses (Rios, McConnell & Brue, 2013). Businesses are faced withmany options that they need to make choices. The existence ofconstrained resources and opportunities disposable to the firms leadsto the need of choosing between two alternatives. The term must beencompassed in every decision, action and choice (Parkin, 2016).Cost-benefit analysis in economics entails calculation of severalcosts. These rates are not captured in the books of accounts, butthey are vital in decision making. It is mainly done by thecomputation of resulting profits or loss on the outlays (Parkin,2016). But in business decision making, there a lot emphasis put onthe estimated revenue that a firm could have received, if theresources could have been used in a different manner. The charge ofopportunity cost is deployed in several situations including jobhiring, and investment. The decisions in business existence should bekeen as they involve the forgoing of one alternative, the benefitsthat could be accrued will never be achieved to the organization. Theconcept of scarcity is the underlying principle for itsadministration in decision making. It can be defined as the limitednumber of resources that businesses face in the running of therealization of their goals. Organization usually have unlimitednumber of needs, however they are faced with constrain on theavailable capital and other factors of production. With scarcity,firms are faced with the problem of trade –offs leading to thearising of the opportunity cost (Abu-Ghunmi, Abu-Ghunmi, Kayal, &Bino, 2016). The term can be expressed in more than the cost basis.It may include time duration and other resources. A farmer may befaced with a trade-off in choosing between growing tomatoes overfarming of potatoes. In this case, the farmer forgoes the revenuethat could have come from the cultivation of potatoes. Here thepotatoes farming represent the opportunity cost.
Inthe case presented in the question, a choice amid the options has tobe established. In this case, the subject has to make a decisionbetween two options. An in-depth analysis should be carried out inarriving at the best choice. The accumulative amount of the tuitionfee on yearly basis alongside any other revenue that could have beenearned is the opportunity cost in this case. To be more precise, theamount totals to 3,000 dollars that is the sum of 25,000 dollars andthe 5,000 dollars. With the new salary set at 40,000 dollars afterthe graduation, the difference is 10,000 dollars. Therefore, afterthree years, the extra 10,000 dollars should have covered theopportunity cost. Here leaving the job and offering studies a chanceis a wiser decision since the benefit expected will be huge. In athree-year period, the cost money involved will be recovered with10,000 dollars annually returns. The benefits cannot be realized ifthis decision is not followed. On graduation, more benefits will berealized. Other reasons for this choice are the expertise that willhave been acquired and the likelihood of promotion.
Abu-Ghunmi,D., Abu-Ghunmi, L., Kayal, B., & Bino, A. (2016). Circulareconomy and the opportunity cost of not ‘closing the loop of waterindustry: the case of Jordan. Journal of Cleaner Production.ces
Bryan,G., & Morten, M. (2015). Economic development the spatialallocation of Labor: Evidence from Indonesia. Manuscript, LondonSchool of Economics and Stanford University.
Parkin,M. (2016). Opportunity cost: A reexamination. The Journal of EconomicEducation, 47(1), 12-22.
Levchenko,A. A., & Zhang, J. (2016). The evolution of comparative: welfareimplications. Journal of Monetary Economics, 78, 96-111.
Rios,M. C., McConnell, C. R., & Brue, S. L. (2013). Economics:Principles, problems, and policies. McGraw-Hill.