ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -All choices, whether they are made by individuals or by groups of individuals such as governments, have a cost associated with them; economists call this an Opportunity Cost. Opportunity cost is the value of the benefits of the foregone alternative, of the next best alternative that could have been chosen, but was not.

Detailed explanation-2: -Why do all economic choices have an opportunity cost? Because the highest valued benefit given up when a choice is made. Suppose that you decide to go to the movies instead of studying for a test. What is the opportunity cost of your decision?

Detailed explanation-3: -The correct answer is Sunlight. Sunlight does NOT have an opportunity cost.

Detailed explanation-4: -This concept acknowledges not just the explicit costs of a choice but also the implicit costs of what you forgo when you make that decision. Opportunity cost provides a framework for decision-making to find the most benefit, particularly for limited resources like time and money.

Detailed explanation-5: -Opportunity cost is a term in economics used to describe benefits that are lost when choosing one option over another. In short, it’s a value of the road not taken. Opportunity costs are easy to overlook, but understanding missed opportunities is crucial to better decision making in business.