Multiple Choice
Which of the following best describes the opportunity cost of an action?
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0. Basic Principles of Economics
Scarcity and Choice
Multiple Choice
The opportunity cost of producing a good or a service can be found by:
A
measuring the amount of resources used in production
B
identifying all possible alternatives regardless of their value
C
calculating the total monetary cost of production
D
determining the value of the next best alternative forgone
Verified step by step guidance1
Understand the concept of opportunity cost: it represents the value of the next best alternative that must be given up when making a choice.
Recognize that opportunity cost is not simply about the amount of resources used or the total monetary cost, but about what you sacrifice in terms of alternative uses of those resources.
Identify the next best alternative that is forgone when a decision is made to produce a particular good or service.
Determine the value of this next best alternative, which could be measured in terms of benefits, profits, or utility that would have been gained if the alternative was chosen instead.
Conclude that the opportunity cost is this value of the next best alternative forgone, which helps in making efficient production and consumption decisions.
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