Multiple Choice
Which basic economic question determines how a society will produce goods and services?
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0. Basic Principles of Economics
Scarcity and Choice
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Opportunity cost refers to:
A
the profit earned from the chosen alternative
B
the value of the next best alternative forgone when a choice is made
C
the amount of resources used in production
D
the total monetary cost of all alternatives
Verified step by step guidance1
Understand the concept of opportunity cost: it represents what you give up when you make a choice, specifically the value of the next best alternative that you do not choose.
Recognize that opportunity cost is not about the profit earned from the chosen alternative, but rather about the value of the alternative you forgo.
Note that opportunity cost is different from the total monetary cost or the amount of resources used; it focuses on the value of the next best alternative, not all alternatives or resource usage.
Identify the correct definition as 'the value of the next best alternative forgone when a choice is made,' which captures the essence of opportunity cost in microeconomics.
Summarize that opportunity cost helps in decision-making by highlighting the trade-offs involved when selecting one option over another.
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