1.3.

5 Entrepreneurs and leaders

4. Business Choices

Every business faces the same issue: limited resources, therefore opportunity cost is at the
heart of every business decision.

1. Define the term ‘opportunity cost’.

2. Give an example of a monetary opportunity cost decision for a startup business.

- spending money on quality rather then market research

3. Give an example of a non-monetary opportunity cost.

Breaking health and safty rules to increase production rates

4. Examine one opportunity cost to a restaurant chef/owner of opening a second restaurant.

Spending money on the rent and costs of the new resutrnat rather then increasing employee
pay thus satsfaction

5. Define the term ‘trade off’.

6. Explain the trade offs that may exist in the following situations:

a) Levi’s pushes its workers to produce more pairs of jeans per hour.

De satisfied employess

b) A chocolate producer, short of cash, must decide whether to cut its advertising spending
or cut back on its research and development into new product ideas.

If they cut research any change in the market could lead to bad things

7. Explain another example of where a business may have to trade off.

8. Explain how a business might decide how to find the right balance when assessing trade offs.