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What is the opportunity cost of an activity?

What is the opportunity cost of an activity?

a. Out-of-pocket cost

b. Out-of-pocket cost plus cost incurred by the Government

c. Value of all opportunities forgone

d. Value of next best alternative that is given up

Answer: d

Explanation: The opportunity cost of an activity is the cost of the next best alternative to that activity. In other words, it’s what you give up when you choose to do one thing instead of another.

Opportunity cost is an important concept in economics because it helps to explain why people make the choices they do. When faced with two options, people will choose the one that gives them the most benefit while costing them the least.

Opportunity cost can also be used to compare different investments. For example, if you’re considering investing in a stock, you’ll want to weigh the opportunity cost of that investment against the potential return.

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