Which of the following best describes the concept of opportunity cost in economics?

• A. The value of the next best alternative foregone when a choice is made
• B. The total revenue earned from selling a product
• C. The amount of money spent to produce a good or service
• D. The difference between supply and demand in a market

Answer: (A)

Verified step by step guidance

1. Understand that opportunity cost is a fundamental concept in economics that refers to the value of the next best alternative that must be given up when making a choice.
2. Recognize that opportunity cost is not about the total revenue earned from selling a product, which relates to income rather than cost of choice.
3. Note that opportunity cost is different from the amount of money spent to produce a good or service, which is known as explicit cost or production cost.
4. Distinguish opportunity cost from the difference between supply and demand, which relates to market equilibrium rather than individual choice.
5. Conclude that the best description of opportunity cost is 'The value of the next best alternative foregone when a choice is made' because it captures the essence of trade-offs in decision-making.