Question

What is the opportunity cost?

A. The benefit Suzie gains from producing 40 shirts.
B. The value of 30 pairs of pants Suzie could have produced instead.
C. The total number of goods Suzie can produce in a week.
D. The amount of time Suzie spends producing goods.

Answer 1

Opportunity cost is the value of the next best alternative forgone when making a decision. In Suzie's case, the opportunity cost is the value of the 30 pairs of pants she could have produced instead of 40 shirts, represented by Option B.

Step-by-step explanation:

The concept of opportunity cost is a fundamental principle in economics that represents the value of the next best alternative that one gives up when making a decision. Option B, 'The value of 30 pairs of pants Suzie could have produced instead,' correctly represents the opportunity cost in this context. It highlights that Suzie is forgoing the production and associated benefits of making 30 pairs of pants, which is indeed the value of the next best alternative she could have engaged in instead of producing 40 shirts.

Understanding opportunity cost is crucial because it elucidates the trade-offs involved in every economic decision. When individuals or businesses make choices, they face the dilemma of selecting one option over others. In the example provided, if Suzie decides to produce shirts, the opportunity cost is the lost opportunity to produce pants, which could have been the next most valuable use of her resources.