Which of the following best describes the term 'opportunity cost' in economics?

• A. The value of the next best alternative forgone when making a decision.
• B. The additional benefit received from consuming one more unit of a good.
• C. The total amount of money spent to produce a good or service.
• D. The price at which goods and services are exchanged in a market.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand that 'opportunity cost' is a fundamental concept in economics that refers to the cost of forgoing the next best alternative when making a choice.
2. Step 2: Recognize that opportunity cost is not about the total money spent or the market price, but rather about what you give up in terms of other options when you make a decision.
3. Step 3: Compare the given options by identifying which one explicitly mentions the 'next best alternative forgone,' as this phrase captures the essence of opportunity cost.
4. Step 4: Eliminate options that describe other economic concepts, such as 'additional benefit from consuming one more unit' (which relates to marginal benefit), 'total amount of money spent' (which relates to cost or expenditure), and 'price at which goods are exchanged' (which relates to market price).
5. Step 5: Conclude that the best description of opportunity cost is 'The value of the next best alternative forgone when making a decision,' as it directly reflects the trade-off involved in economic choices.