In microeconomics, what is meant by opportunity cost?

• A. The monetary price paid for a good or service in a market transaction
• B. The additional (marginal) benefit received from consuming one more unit of a good
• C. The value of the next-best alternative that must be given up when a choice is made
• D. The total amount of money spent on producing a good, including fixed and variable costs

Answer: (C)

Verified step by step guidance

1. Understand that opportunity cost is a fundamental concept in microeconomics that refers to the value of the next-best alternative foregone when making a decision.
2. Recognize that opportunity cost is not simply the monetary price paid for a good or service, but rather what you give up in terms of other alternatives when you choose one option over another.
3. Note that opportunity cost differs from marginal benefit, which is the additional benefit gained from consuming one more unit of a good.
4. Also distinguish opportunity cost from total production costs, which include fixed and variable costs incurred in producing a good.
5. Therefore, the correct interpretation of opportunity cost is the value of the next-best alternative that must be given up when a choice is made.