In the context of scarcity and choice, what best describes the opportunity cost of buying a new car?

• A. The depreciation of the car’s value over time after purchase
• B. The monthly loan payment you make after buying the car
• C. The value of the next best alternative you give up, such as the other goods, services, or savings you could have purchased with the money and time spent on the car
• D. The car’s sticker price plus sales tax and registration fees

Answer: (C)

Verified step by step guidance

1. Understand the concept of opportunity cost: it is the value of the next best alternative foregone when making a choice.
2. Identify the decision being made: buying a new car involves spending money and time that could be used elsewhere.
3. Recognize that opportunity cost is not about the depreciation or loan payments themselves, but what you give up by choosing the car over other options.
4. Consider what alternatives you could have chosen instead, such as other goods, services, or savings that the money and time could have been spent on.
5. Conclude that the opportunity cost of buying a new car is the value of the next best alternative use of the resources (money and time) spent on the car.