2021 · Q48
Which one of the following is the opportunity cost of a chosen activity?
General KnowledgeIndian Economy
- AOut of pocket cost
- BOut of pocket cost plus cost incurred by the Government
- CValue of all opportunities forgone
- DValue of next best alternative that is given up
Explanation
Opportunity cost is the value of the next best alternative that is given up when a choice is made - it measures what is sacrificed, not out-of-pocket spending or government cost. 'The value of all opportunities forgone' overstates the concept, since economics defines it against the single next-best use. The next-best-alternative formulation is the textbook definition.