Sunn Company manufactures a single product. Which of the following best describes the opportunity cost of producing one more unit of this product?

• A. The profit earned from selling the additional unit
• B. The value of the next best alternative use of resources forgone to produce the additional unit
• C. The total cost incurred in producing all units of the product
• D. The price at which the product is sold in the market

Answer: (B)

Verified step by step guidance

1. Understand the concept of opportunity cost: it represents the value of the next best alternative that must be forgone when a choice is made.
2. Identify that producing one more unit of a product requires using resources that could have been used elsewhere, so the opportunity cost is related to what is sacrificed by using those resources for this unit.
3. Recognize that the profit earned from selling the additional unit is a benefit, not a cost, so it does not represent opportunity cost.
4. Note that the total cost incurred in producing all units is a cumulative measure and does not specifically capture the cost of producing one additional unit or the alternative uses of resources.
5. Conclude that the opportunity cost of producing one more unit is best described as the value of the next best alternative use of resources forgone to produce that additional unit.