Question

The opportunity cost of a decision is measured in terms of

1. the price of the alternative we choose.
2. sunk cost.
3. time.
4. the next best thing given up. the price of a new opportunity that arises.

Answer 1

Answer:

4. the next best thing given up. the price of a new opportunity that arises.

Explanation:

The opportunity cost is the cost we incurr when we choose something instead of other alternatives. To put it more simply: it the cost of the alternatives that we give up when we choose something.

For example, suppose I have $1,000 and have two options: 1) putting the money on a savings account that pays 2% annual interest 2) buying and Iphone X.

If I put the money on the savings account, the opportunity cost is the lack of enjoyment that and Iphone X would have provided me.

And if I bought the Iphone X, the opportunity cost would be the lack of interest earned on the deposit.