In microeconomics, which statement best describes an opportunity cost?

• A. A cost that cannot be recovered once it has been incurred (a sunk cost)
• B. The value of the next best alternative that must be given up when a choice is made
• C. The total amount of money spent on a good or service
• D. The additional benefit received from consuming one more unit of a good (marginal benefit)

Answer: (B)

Verified step by step guidance

1. Understand the concept of opportunity cost: it refers to the value of the next best alternative that is foregone when a decision is made.
2. Recognize that sunk costs are costs that have already been incurred and cannot be recovered, so they are not opportunity costs.
3. Identify that total amount of money spent on a good or service is simply the expenditure, not the opportunity cost.
4. Note that marginal benefit is the additional benefit from consuming one more unit, which is different from opportunity cost.
5. Conclude that the best description of opportunity cost is the value of the next best alternative that must be given up when a choice is made.