What is opportunity cost in economics?

• A. The money spent on a good.
• B. The time required to produce a good.
• C. The value of the next-best alternative forgone when making a decision.
• D. The benefits of the chosen option.

Answer: (C)

Opportunity cost is the value of the next-best alternative forgone when making a decision. It means when you choose one option, you sacrifice the benefit you would have received from the best alternative you could have chosen instead. The key idea is that resources are limited, so every choice has a cost in what you give up.

For example, if you have $10 and decide to buy a new book, the opportunity cost is what you could have gained from the next-best use of that $10, like a movie ticket or savings for something else you value. Or if you spend your afternoon working a part-time job, the opportunity cost is the enjoyment or rest you would have gotten from leisure activities you passed up.

The other ideas don’t capture this trade-off. The money spent on a good describes a direct cost, not the missed alternative. The time to produce a good is about production input, not what you lose by choosing one option over another. The benefits of the chosen option describe what you gain, not what you give up.