The computation of the opportunity cost is shown below:
= Difference in military spending × economy ÷ percentage
The Difference in military spending is
= 3.7 - 3
The Economy is $14 trillion
And, the percentage is 100
Now placing these values to the above formula
So, the opportunity cost is
= (3.7 - 3) × $14 trillion ÷ 100
= 0.7 × $14 trillion ÷ 100
= $98 billion
You need to multiply $7 Trillion by 0.004 (0.4%)
$7,000,000,000,000 X 0.004 = $28,000,000,000
and the opportunity cost (in civilian output) of a defense buildup is $28 Billion.
Opportunity cost is the benefit that the person can be received, but they gave up, to take another course of action. It is also a benefit, profit or value of something they give up to achieve or acquire something else.
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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