You recently started a small affiliate business. Which of the following best describes the opportunity cost of running your business?

• A. The amount of money you spend on advertising and marketing
• B. The profit you earn after paying all expenses
• C. The value of the next best alternative use of your time and resources that you give up to run the business
• D. The total revenue generated by your affiliate business

Answer: (C)

Verified step by step guidance

1. Understand the concept of opportunity cost: it represents the value of the next best alternative that you forego when making a decision.
2. Identify the resources involved in running your affiliate business, such as your time, money, and effort.
3. Recognize that the opportunity cost is not just the explicit expenses (like advertising costs) or the profit earned, but what you give up by choosing to run the business instead of the next best alternative.
4. Formulate the opportunity cost as the value of the next best alternative use of your time and resources, which could be working elsewhere, investing your money differently, or leisure time.
5. Conclude that the opportunity cost is best described as the value of the next best alternative use of your time and resources that you give up to run the business.