Which situation best illustrates an opportunity cost?

• A. A city builds a new road and hires unemployed workers to do the construction.
• B. A student spends Saturday studying for an exam instead of working a paid shift, so they give up the wages they would have earned.
• C. A consumer buys two identical coffees and enjoys twice as much caffeine.
• D. A shopper buys a jacket on sale and pays less money than expected.

Answer: (B)

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. Analyze each situation to identify what is being given up when a decision is made.
3. For the city building a new road and hiring unemployed workers, note that since the workers were unemployed, there is no clear alternative use of their labor being sacrificed, so opportunity cost is minimal or zero here.
4. For the student studying instead of working a paid shift, recognize that the student gives up the wages they could have earned, which is a clear example of opportunity cost because the next best alternative (working) is sacrificed.
5. For the consumer buying two coffees or the shopper buying a jacket on sale, these situations do not clearly involve giving up a next best alternative, so they do not best illustrate opportunity cost.