Which concept in economics best describes the situation where investors must choose among different investment options, each with its own risks and returns?

• A. Opportunity cost
• B. Law of demand
• C. Marginal utility
• D. Market equilibrium

Answer: (A)

Verified step by step guidance

1. Understand the concept of opportunity cost: it refers to the value of the next best alternative foregone when making a choice.
2. Recognize that when investors choose among different investment options, they must consider what they give up by not selecting the other options.
3. Identify that each investment option has its own risks and returns, so choosing one means sacrificing the potential benefits of the others.
4. Relate this decision-making process to the concept of opportunity cost, as it captures the trade-offs involved in selecting one investment over another.
5. Conclude that among the given options, opportunity cost best describes the situation where investors must choose among alternatives with different risks and returns.