Opportunity costs is defined as ________.
A) the cost of manufacturing a one-time-only special order when a firm has excess capacity to make more products
B) the contribution to operating income that is forgone by not using a limited resource in its next-best alternative use
C) the sum of variable and fixed costs in a particular business function of the value chain, such as manufacturing costs or marketing costs
D) the sum of variable and fixed costs in all business functions of the value chain, such as manufacturing costs or marketing costs

Question

Quizplus · Accepted Answer

Opportunity cost refers to the potential benefit that is foregone when choosing one option over another. It is the value of the next-best alternative that must be given up in order to pursue a certain action. Therefore, option B correctly defines opportunity cost as the contribution to operating income that is forgone by not using a limited resource in its next-best alternative use. The other options are incorrect definitions of other concepts.

Opportunity Costs Is Defined as ________