The concept of "opportunity cost" in economics refers to:
Show answer & explanation
Correct answer: A
Explanation
Answer: The value of the next best alternative forgone when a choice is made.
Explanation: The concept of opportunity cost refers to the benefit that is lost when one alternative is chosen over another. In economics, resources are limited, so choosing one option means giving up the next best alternative. That forgone benefit is called opportunity cost.
Additional Key Facts
It is a core concept in microeconomics.
It applies to decisions involving time, money, and resources.
Opportunity cost is not always monetary; it can be non-financial too.
It helps in rational decision-making.
It is different from sunk cost, which cannot be recovered.
Potential Exam-Oriented Questions & Answers
Question: What is the difference between opportunity cost and sunk cost?
Answer: Opportunity cost is future benefit forgone, while sunk cost is past unrecoverable cost
Question: Why is opportunity cost important in economics?
Answer: It helps in making rational and efficient decisions