Question

What is the opportunity cost if you spend $100,000 for an item but take another option to spend $40,000 for the item?

a) $40,000
b) $60,000
c) $100,000
d) $140,000

Answer 1

The opportunity cost of choosing to spend $40,000 for an item instead of $100,000 is the difference between the two costs, which is $60,000. This represents the foregone value that could have been retained if the more expensive option had been chosen.

Step-by-step explanation:

The concept behind the student's question revolves around opportunity cost, which is a fundamental idea in economics. Opportunity cost refers to the value of the next best alternative foregone when making a decision. For the specific question, if you have the option to spend $100,000 for an item or spend $40,000 for the item, the opportunity cost of choosing the cheaper price is the difference in the costs, which is $60,000.

In other terms, by choosing the $40,000 option, you sacrifice the opportunity to keep the additional $60,000 that you would have spent if you had chosen the $100,000 option. Therefore, the correct answer to the question is option b) $60,000, as that is the cost of the opportunity that was not taken.