Multiple Choice
Because of differences in opportunity costs, individuals and businesses:
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0. Basic Principles of Economics
Scarcity and Choice
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Opportunity cost is best defined as:
A
the amount of money spent on a chosen option
B
the total monetary cost of all alternatives
C
the value of the next best alternative forgone when a choice is made
D
the benefit received from all available alternatives
Verified step by step guidance1
Understand that opportunity cost refers to the value of the next best alternative that must be given up when making a choice.
Recognize that it is not simply the amount of money spent or the total monetary cost, but rather the benefit or value that is foregone from the next best option.
Identify that opportunity cost helps in decision-making by highlighting what is sacrificed when selecting one option over another.
Note that it is different from the total benefit received from all alternatives, as it focuses only on the single best alternative that is not chosen.
Summarize that the correct definition of opportunity cost is: the value of the next best alternative forgone when a choice is made.
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