The next best alternative given up when making a choice is known as:

The next best alternative given up when making a choice is known as:

• A. Scarcity
• B. Opportunity cost
• C. Overseas sector
• D. Leakages

Answer: (B)

Opportunity cost is the value of the next best alternative you give up when you make a choice. This idea gets at the trade-off you face because resources are limited, so choosing one option means forgoing another that could have been chosen with those same resources. For example, studying for a test instead of working a part-time job means you give up the wages you could have earned. If land is used to grow corn rather than wheat, the opportunity cost is the amount of wheat you could have produced with those resources. Scarcity explains why choices exist, but not the cost of the chosen option itself. The overseas sector and leakages describe other concepts in macroeconomics and do not capture the foregone alternative that defines opportunity cost.

Opportunity cost is the value of the next best alternative you give up when you make a choice. This idea gets at the trade-off you face because resources are limited, so choosing one option means forgoing another that could have been chosen with those same resources. For example, studying for a test instead of working a part-time job means you give up the wages you could have earned. If land is used to grow corn rather than wheat, the opportunity cost is the amount of wheat you could have produced with those resources. Scarcity explains why choices exist, but not the cost of the chosen option itself. The overseas sector and leakages describe other concepts in macroeconomics and do not capture the foregone alternative that defines opportunity cost.