Which of the following best illustrates an opportunity cost under scarcity?

• A. You spend \$20 on a movie ticket instead of buying a book, so the opportunity cost is the book you did not buy.
• B. A movie theater raises ticket prices, so the opportunity cost of movies increases for everyone.
• C. You enjoy the movie more than the book, so there is no opportunity cost.
• D. You pay \$20 for a movie ticket, so the opportunity cost is \$20.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of opportunity cost. Opportunity cost is the value of the next best alternative that you give up when making a choice under scarcity.
2. Step 2: Identify the choices involved in the problem. Here, the choice is between spending \$20 on a movie ticket or buying a book.
3. Step 3: Recognize that the opportunity cost is not the money spent itself, but what you forgo by spending that money on one option instead of the other.
4. Step 4: Analyze each option: Spending \$20 on a movie means you cannot buy the book, so the opportunity cost is the book you did not buy, which represents the next best alternative.
5. Step 5: Conclude that the best illustration of opportunity cost under scarcity is the value of the book forgone when choosing to spend money on the movie ticket.