ECONOMICS (CBSE/UGC NET)

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ECONOMICS

OPPORTUNITY COST

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
The Gomez family has saved some money. They can spend it on a vacation to the Grand Canyon or build a swimming pool in their back yard. They decide to spend the money on a swimming pool. What is the opportunity cost of their decision?
A
vacation
B
swimming pool
C
Either A or B
D
None of the above
Explanation: 

Detailed explanation-1: -“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-2: -Opportunity cost refers to what you have to give up to buy what you want in terms of other goods or services. When economists use the word “cost, ” we usually mean opportunity cost.

Detailed explanation-3: -What is the simple definition of opportunity cost? Opportunity cost is the value of what you lose when choosing between two or more options. Every choice has trade-offs, and opportunity cost is the potential benefits you’ll miss out on by choosing one direction over another.

Detailed explanation-4: -In economics, opportunity cost represents the potential gain that is lost when choosing one investment choice over another.

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