Paul receives $300 as a birthday gift.In deciding how to spend the money,he narrows his options down to four: A,B,C,and D.The price of each option is $200,but Paul prefers B to A,A to C,and C to D.What is the opportunity cost of option B?

Question

Quizplus · Accepted Answer

The opportunity cost of option B is the value of the next best alternative, which is option A. Paul prefers option B to A, so he is willing to give up the value of A for the benefit of B. Therefore, the opportunity cost of option B is Paul's valuation of A.

Paul Receives $300 as a Birthday Gift