Which term describes the next-best alternative that must be forgone in order to produce one more unit of a given product?

• A. Marginal benefit
• B. Fixed cost
• C. Opportunity cost
• D. Sunk cost

Answer: (C)

Verified step by step guidance

1. Understand the concept of opportunity cost: it refers to the value of the next-best alternative that is given up when a choice is made.
2. Recognize that producing one more unit of a product requires using resources that could have been used elsewhere, so the opportunity cost measures what you sacrifice by this decision.
3. Differentiate opportunity cost from other terms: Marginal benefit is the additional gain from one more unit; Fixed cost is a cost that does not change with output; Sunk cost is a past cost that cannot be recovered.
4. Identify that the term describing the next-best alternative forgone when producing one more unit is 'Opportunity cost'.
5. Conclude that understanding opportunity cost helps in making efficient production decisions by considering what must be sacrificed.