The problem set #2
Opportunity cost is the foregone profit for better profitability, probably from property or investment sale. Organizations are always faced with a dilemma to invest or not depending on the outcomes of the decision. Opportunity cost, though, acts as a reminder to managers and leaders of their decisions’ weight, which is rare in real life (Froeb, McCann & Ward, 2018). This is because managers try as much as possible to come up with decisions that benefit their organization. An example of opportunity cost can be found in the below example.
When working with a real estate agency at one time. The organization received many visitors and clients who wanted to sell and those who wanted to buy houses and other properties using the agency. One client came to me searching for a house that would accommodate him and his family and a big enough field. I started searching for the various options I had from my computer as I showed him the houses. The houses ranged from US $280 000 to the US $500 000. The photos of the respective houses plus all the details were alongside the houses. As I continued to go through the houses with the client, the client chose one of the houses, which was tagged the US $340, 000. On opening the house to check all the details, I discovered other houses were similar to that house. The only difference was the location of the houses. The house that the client choose was near a lake even though it had a small field and a surrounding bush which resembled a forest. On comparing the price for the houses, the house was a little bit over-priced since similar houses were housed at US$320,000-325000. I advised the client to take the lower-priced housed due to the lower prices, but he declined and insisted on taking the one he had chosen.
Since the client had chosen the house and insisted on it, I forwarded the details for the client to my superior to complete the sale. The company was had an obligation to sell the house to the client since customers have to get what they want as long as they can pay for it. The opportunity cost for the house sold assuming the closest comparison was the house selling at the US $325,000 will be 340000-325000= the US $15000. The client could have saved or made a profit of US$15,000 (Froeb, McCann & Ward, 2018). On the question of what the company would have done to avoid the same, is there is nothing since the company policy favored the customers.
Reference
Froeb, L. M., McCann, B. T., & Ward, M. R. (2018). Managerial economics. Cengage learning.