Question

The value of a resource in its next best alternative use is known as:

• A. Marginal cost
• B. Sunk cost
• C. Imported cost
• D. Opportunity cost

Hint:

Exam Tip: Opportunity cost is a key concept in economics. Always remember that it's not just about money, but about the value of the next best alternative. For example, the opportunity cost of going to college is the salary you could have earned by working instead.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
This question tests a fundamental concept in economics: the concept of cost in the context of decision-making and resource allocation.

Step 2: Defining Key Terms:
Let's define each term:

• Marginal Cost: The additional cost incurred in producing one more unit of a good or service.
• Sunk Cost: A cost that has already been incurred and cannot be recovered.
• Imported Cost: This is not a standard economic term. It likely refers to the cost of an imported good.
• Opportunity Cost: The value of the next best alternative that is forgone when a choice is made. It represents the benefits you could have received by taking a different action.

Step 3: Analyzing the Definition:
The question states: "The value of a resource in its next best alternative use."
This is the exact definition of opportunity cost.
When you choose to use a resource (e.g., time, money, land) for one purpose, the opportunity cost is what you could have gained by using it for the next best alternative.

Step 4: Final Answer:
The value of a resource in its next best alternative use is known as opportunity cost. Therefore, option (D) is correct.