The basic economic cost of unemployment is forgone:

• A. tax revenue
• B. consumer surplus
• C. output
• D. government spending

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of the economic cost of unemployment. It refers to the loss in economic efficiency and welfare due to resources (labor) not being fully utilized.
2. Step 2: Identify what is meant by 'forgone output.' When people are unemployed, they are not producing goods or services, so the economy produces less than its potential.
3. Step 3: Recognize that forgone output represents the value of goods and services that could have been produced if all labor resources were employed.
4. Step 4: Differentiate forgone output from other options like tax revenue, consumer surplus, and government spending, which are related but not the primary economic cost of unemployment.
5. Step 5: Conclude that the basic economic cost of unemployment is the loss of output, i.e., the reduction in total production due to unemployed labor.