In the context of resource allocation, which of the following best describes the

Practice Questions

Q1
In the context of resource allocation, which of the following best describes the term 'opportunity cost'?
  1. The cost of the next best alternative foregone when a decision is made.
  2. The total cost incurred in the production of goods.
  3. The financial cost associated with a resource.
  4. The cost of resources that are not utilized.

Questions & Step-by-Step Solutions

In the context of resource allocation, which of the following best describes the term 'opportunity cost'?
  • Step 1: Understand that when you make a choice, you have to give up something else.
  • Step 2: Identify what you are giving up when you make that choice.
  • Step 3: Recognize that the value of what you gave up is called 'opportunity cost'.
  • Step 4: Realize that opportunity cost is specifically about the next best alternative you could have chosen.
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