An opportunity cost can be defined as the cost associated with an alternative action that an individual, an organization or the government have to forgo. For instance, for an individual, the opportunity cost with respect to getting an educational degree in a University can be defined as the money the individual would have earned in the four years if they had worked (invested their time in working), instead of pursuing the education (Blinder, & William, 2005). An opportunity cost is more of a choice between options. In the case of an organization or a business firm, opportunity cost could be defined in a similar way.
Here, opportunity costs for a firm is defined as the money that the firm should have earned if it had used its equipment, or assets in a different way than was its current used. Opportunity cost in economy is defined in terms of money; however, it needs not always be defined in terms of money. An example for opportunity cost for a business could be a case scenario where a small business might own the equipment that it needs instead of renting it. The opportunity cost here would be the cost associated with renting. Renting could have meant less maintenance charges for the equipment (Vera-Munoz, 1998).
The opportunity costs in the case of the Chinese Government can be understood from how Chinese had introduced for low coal prices as part of the benefits of its energy subsidy policy. This was a part of the centralized pricing system of the Chinese Government (OECD, 1999). The opportunity costs associated with this action are that of the costs of reducing the current overexploitation of natural resources. If the coal prices were higher, the exploitation would have been lower.
Frictional unemployment happens because there might be some changes in the people as in the case of demographic change, or people switching occupations, etc. This form of unemployment is however a voluntary unemployment (Ernest, & Lieberman, 2004). Cyclical unemployment on the other hand is one where workers lose their job as part of the business cycle. In the context of an economic recession, the workers would be afraid to quit because they would be worried about salary and finding a job. Frictional unemployment would hence be less. In the case of unemployment, there could be varied effects on the economy. Mainly, there would be unemployment financial costs that the country would have to bear. The consumer would not be willing to purchase and thus the spending power would be decreased and more (Ernest, & Lieberman, 2004).