COST ACCOUNTING
INFORMATION FOR DECISION MAKING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the value of the next best option that is not selected when a choice is made.
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there is not enough of it.
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things people make to earn money.
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actions people do to earn money.
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Detailed explanation-1: -Opportunity cost is the forgone benefit that would have been derived from an option not chosen. To properly evaluate opportunity costs, the costs and benefits of every option available must be considered and weighed against the others.
Detailed explanation-2: -“Opportunity cost is the value of the next-best alternative when a decision is made; it’s what is given up, ” explains Andrea Caceres-Santamaria, senior economic education specialist at the St. Louis Fed, in a recent Page One Economics: Money and Missed Opportunities.
Detailed explanation-3: -The statement is TRUE. The significance of the better opportunity foregone in a specific choice is referred to as opportunity cost. It’s not just the money spent on that option. Limited availability, preference, and opportunity cost are central concepts in economic analysis.
Detailed explanation-4: -Opportunity cost is the value of the best alternative forgone in making any choice.
Detailed explanation-5: -In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives.