Opportunity cost is defined as A. the monetary expense associated with an activity. B. the highest valued alternative that must be given up to engage in an activity. C. the benefit of an activity. D. the total value of all alternatives that must be given up to engage in an activity.

Question

Brogan

Business

27 May, 02:00

Opportunity cost is defined as A. the monetary expense associated with an activity. B. the highest valued alternative that must be given up to engage in an activity. C. the benefit of an activity. D. the total value of all alternatives that must be given up to engage in an activity.

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Cordell Acevedo · Answer 1

B. the highest valued alternative that must be given up to engage in an activity.

Explanation:

Opportunity Cost is the cost of next best alternative foregone while choosing an alternative.

Eg1: If I like Chapati more than rice & rice more than curd, the opportunity cost of consuming chapati is the next best option i. e rice.

Eg2 : Working as school teacher with salary 20000, next best option salary as coaching tutor i. e 10000 is the Opportunity Cost

A is inapt : Opportunity cost can be monetary or non monetary. Eg2 has monetary opportunity cost. But, Eg 1 has opportunity cost in terms of rice' (sacrifised) satisfaction.

C is inapt : Opportunity cost is only the cost of next best alternative & not all alternatives. Eg1 - Curd i. e 3rd best option after chapati, is not the opportunity cost after chapati.