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: -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.

Detailed explanation-3: -“The real cost of any purchase isn’t the actual dollar cost. Rather, it’s the opportunity cost-the value of the investment you didn’t make, because you used your funds to buy something else.”

Detailed explanation-4: -Answer and Explanation: Of the given statements about opportunity costs, (a) III only is TRUE. I. The opportunity cost of a given action is equal to the value foregone of all feasible alternative actions.

Detailed explanation-5: -Investors are always faced with options about how to invest their money to receive the highest or safest return. The investor’s opportunity cost represents the cost of a foregone alternative. If you choose one alternative over another, then the cost of choosing that alternative becomes your opportunity cost.