What are the limitations of the concept of opportunity cost?

1.	What are the limitations of the concept of opportunity cost?
Answer» The concept of opportunity cost is not free from the following limitations: The doctrine cannot be applied to those factors which are specific and which have no alternative uses. The transfer cost of such factors is zero. The theory is based on the assumption of perfect competition, which is not found in reality. There may be difference between individual and social costs. A smoke emithing , factory in the heart of the town may involve large sacrifice or alternatives in the form of hazards to health which cannot be measured in monetary terms. The foregone alternatives are often not clearly ascertainable due to modern complex production system. If factors are prevented from moving then their prices do not reflect opportunity cost.

Answer»

The concept of opportunity cost is not free from the following limitations:

The doctrine cannot be applied to those factors which are specific and which have no alternative uses. The transfer cost of such factors is zero.
The theory is based on the assumption of perfect competition, which is not found in reality.
There may be difference between individual and social costs. A smoke emithing , factory in the heart of the town may involve large sacrifice or alternatives in the form of hazards to health which cannot be measured in monetary terms.
The foregone alternatives are often not clearly ascertainable due to modern complex production system.
If factors are prevented from moving then their prices do not reflect opportunity cost.

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