Chapter 3 - Opportunity Cost

Question 1

Define opportunity cost.

Answer 1

Opportunity cost is the cost/loss of the next best alternative when a decision is made.

Question 2

What is the influence of opportunity cost on decision-making?

Answer 2

• Consumers have limited incomes, so whenever they purchase a particular good or service, they give up the benefits of purchasing another product.
• Workers tend to specialize.
• Producers need to choose from competing business opportunities.