In the context of profit maximization, which of the following scenarios best illustrates the concept of opportunity cost in decision-making?

Opportunity cost is the value of what you give up when you choose one option over another. In the context of profit maximization, if a company decides to invest money in new machinery instead of using that money to expand its advertising, the opportunity cost is the potential increased sales that better advertising could have brought in. For example, if the advertising could have generated an extra $10,000 in profit, but the machinery only increases profit by $7,000, the company is losing $3,000 in potential profit by not choosing the advertising. This shows that understanding opportunity costs is crucial for making smart business decisions that truly maximize profit. By considering what is sacrificed, businesses can better evaluate their options and choose the one that will yield the highest returns.