ECONOMICS
OPPORTUNITY COST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the value of the next best alternative that is given up due to the choice you made
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The price you pay to purchase something
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The benefit you gain by making a decision
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The amount of debt you take on by making a decision
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Detailed explanation-1: -Opportunity cost is defined as the cost of the next best alternative foregone. It represents the sacrifices that people must make due to the scarcity of resources.
Detailed explanation-2: -When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can’t spend the money on something else.
Detailed explanation-3: -“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-4: -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-5: -Opportunity cost is the value of the next best alternative forgone as a result of making a decision. Opportunity cost is a function of scarcity. Because of scarcity, people are faced with trade-offs in how they use their limited resources.