Chapter 1, Problem 7MCQ

To determine

The question requires us to determine the definition of opportunity cost.

Explanation of Solution

An opportunity cost is the next best alternative option chosen by a person to get something else.

Suppose a person always prefers reading books over listening to audio. If he chooses to read the book, then the listening audio will be his opportunity cost for reading the book.

If a student has two options; taking an online class or earning through hourly freelancing, then for a student, foregone freelancing payment is the opportunity cost of taking online classes.

So, opportunity cost is the next best value of alternatives that must be given up to gain something.