Multiple Choice
Societies embrace various economic systems to deal with the fundamental problem of:
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0. Basic Principles of Economics
Scarcity and Choice
Multiple Choice
In the context of scarcity and choice, what term is used to describe the value of the next best alternative that is forgone when a decision is made?
A
Marginal benefit
B
Sunk cost
C
Explicit cost
D
Opportunity cost
Verified step by step guidance1
Understand the concept of scarcity: Resources are limited, so choosing one option means giving up others.
Recognize that when a choice is made, the value of the next best alternative that is not chosen is important.
Define the term 'opportunity cost' as the value of the next best alternative forgone when making a decision.
Differentiate opportunity cost from other terms: Marginal benefit refers to the additional gain from one more unit, sunk cost is a past cost that cannot be recovered, and explicit cost is a direct monetary payment.
Conclude that the correct term describing the value of the next best alternative forgone is 'opportunity cost'.
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