Multiple Choice
Which of the following best describes the basic choices faced by all societies due to scarcity?
109
views
0. Basic Principles of Economics
Scarcity and Choice
Multiple Choice
When you spend \$25 on a new insulated water bottle, what is the opportunity cost of this decision?
A
The satisfaction gained from owning the water bottle
B
The total amount of money spent on the water bottle
C
The value of the next best alternative you could have purchased with the \$25
D
The price difference between insulated and non-insulated water bottles
Verified step by step guidance1
Understand the concept of opportunity cost: it is the value of the next best alternative foregone when making a choice.
Identify the decision made: spending \$25 on a new insulated water bottle.
Recognize that the opportunity cost is not the satisfaction gained or the total amount spent, but what else could have been obtained with that \$25.
Consider what other goods or services could be purchased with the \$25 if the water bottle was not bought; this represents the next best alternative.
Conclude that the opportunity cost is the value of this next best alternative, which is what you give up by choosing to buy the insulated water bottle.
Related Videos
Related Practice
