Reply To: "All costs are opportunity costs"


Thanks, Dr. Herbener! That makes sense, but I have one last clarification. I’m trying to integrate the bidding process and the equivalence of the price of a factor of production with opportunity cost in my mind.

“Thus, any entrepreneur who buys an input today pays for the value that will be lost in the future from not using it in other lines of production today.”

So if an entrepreneur who has increased demand for his product, bids for a resource (factor of production), increases the market price (of that factor), then the price he pays for it is equivalent to the value that the factor would have attained in the future, had it been used in the production process that has now been displaced by the production process with increased demand?

I think this is just a restatement of your quote. If so, is the price paid for the factor equivalent to the value of the displaced line of production, because at that price, the displaced line of production earns 0 profit (revenue=cost) and so no entrepreneur no longer wishes to do it?