Clay Industries, a large industrial firm, is considering the development of an underwater drilling system which will greatly increase the productivity of deep-sea petroleum extraction. However, the development of the system involves substantial setup and implementation costs. If Clay Industries chooses to begin developing the new system, the firm will be forced to decline several other promising projects, due to a lack of available investment capital. Which of the following terms most correctly describes the problem faced by Clay Industries?
Click on the arrows to vote for the correct answer
A. B. C. D. E.D
In this example, Clay Industries is faced with several mutually-exclusive projects. If the firm begins to develop the underwater drilling system, it will be forced to decline the acceptance of other projects. This is an opportunity cost problem.