Which of the following best describes the factors that determine the opportunity cost of a decision?

• A. The total monetary cost of all available alternatives.
• B. The sum of all benefits received from every possible alternative.
• C. The value of the next best alternative that is forgone when a choice is made.
• D. The amount of resources used in producing the chosen good or service.

Answer: (C)

Verified step by step guidance

1. Understand the concept of opportunity cost: it represents the value of the next best alternative that must be given up when making a decision.
2. Recognize that opportunity cost is not about the total monetary cost or the sum of all benefits from every alternative, but specifically about the value of the single best alternative that is forgone.
3. Identify that opportunity cost focuses on the trade-off between choices, emphasizing what you sacrifice in order to pursue a particular option.
4. Note that the amount of resources used in producing a good or service relates to production costs, which is different from opportunity cost, which is about forgone alternatives.
5. Conclude that the best description of opportunity cost is: 'The value of the next best alternative that is forgone when a choice is made.'