Which of the following statements is NOT true about opportunity cost?

• A. Opportunity cost refers to the value of the next best alternative forgone when making a choice.
• B. Opportunity cost is a key concept in understanding how individuals and societies allocate scarce resources.
• C. Opportunity cost only includes monetary costs and ignores non-monetary factors.
• D. Opportunity cost can be applied to both individuals and firms when making decisions.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the definition of opportunity cost. Opportunity cost is the value of the next best alternative that is forgone when a choice is made. This includes both monetary and non-monetary factors.
2. Step 2: Recognize that opportunity cost is a fundamental concept in economics because it helps explain how individuals and societies allocate scarce resources efficiently.
3. Step 3: Note that opportunity cost applies broadly to decision-making by both individuals and firms, as both face trade-offs when choosing among alternatives.
4. Step 4: Analyze the statement 'Opportunity cost only includes monetary costs and ignores non-monetary factors.' Since opportunity cost includes all relevant costs, both monetary and non-monetary (such as time, satisfaction, or other benefits), this statement is incorrect.
5. Step 5: Conclude that the statement which claims opportunity cost only includes monetary costs is NOT true, while the other statements correctly describe opportunity cost.