Which of the following best describes the concept of opportunity cost in economics?

• A. The amount of money spent on resources used in production
• B. The profit earned from selling a product
• C. The total monetary cost of producing a good or service
• D. The value of the next best alternative forgone when a choice is made

Answer: (D)

Verified step by step guidance

1. Step 1: Understand that opportunity cost is a fundamental concept in economics that refers to the value of the next best alternative that must be given up when making a decision.
2. Step 2: Recognize that opportunity cost is not simply the amount of money spent or the profit earned, but rather what you sacrifice in terms of other options when you choose one option over another.
3. Step 3: Identify that the opportunity cost involves comparing the benefits of the chosen option with the benefits of the next best alternative that is forgone.
4. Step 4: Note that opportunity cost helps individuals and firms make informed decisions by considering what they must give up to pursue a particular action.
5. Step 5: Conclude that the best description of opportunity cost is 'The value of the next best alternative forgone when a choice is made,' as it captures the essence of trade-offs in economic decision-making.