Multiple Choice
In the context of scarcity and choice, the opportunity cost of an item is best defined as:
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0. Basic Principles of Economics
Scarcity and Choice
Multiple Choice
Which of the following best illustrates an opportunity cost under scarcity?
A
You spend \$20 on a movie ticket instead of buying a book, so the opportunity cost is the book you did not buy.
B
A movie theater raises ticket prices, so the opportunity cost of movies increases for everyone.
C
You enjoy the movie more than the book, so there is no opportunity cost.
D
You pay \$20 for a movie ticket, so the opportunity cost is \$20.
Verified step by step guidance1
Step 1: Understand the concept of opportunity cost. Opportunity cost is the value of the next best alternative that you give up when making a choice under scarcity.
Step 2: Identify the choices involved in the problem. Here, the choice is between spending \$20 on a movie ticket or buying a book.
Step 3: Recognize that the opportunity cost is not the money spent itself, but what you forgo by spending that money on one option instead of the other.
Step 4: Analyze each option: Spending \$20 on a movie means you cannot buy the book, so the opportunity cost is the book you did not buy, which represents the next best alternative.
Step 5: Conclude that the best illustration of opportunity cost under scarcity is the value of the book forgone when choosing to spend money on the movie ticket.
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