The opportunity cost of producing good A is defined to be
A)the money cost of the factors of production used in good A.
B)the retail price of good A.
C)the cheapest method of producing good A.
D)what must be sacrificed of other goods to get an additional unit of good A.
E)the cost of having to get by using something else in place of good A.

Question

Quizplus · Accepted Answer

Opportunity cost is the cost of foregone alternatives, or in other words, what must be sacrificed of other goods to produce or consume one more unit of a particular good. Therefore, option D is the correct answer. Option A is incorrect because it only considers the money cost of factors of production, and does not take into account the potential alternative uses of those factors. Option B is incorrect because the retail price of good A only reflects the demand for the good, and does not take into account the opportunity cost of producing it. Option C is incorrect because the cheapest method of producing good A may not necessarily be the most efficient use of resources, and does not consider the potential opportunity cost of using those resources for other goods. Option E is incorrect because it only considers the cost of switching to a substitute for good A, and does not take into account the potential opportunity cost of using those resources for other goods.

The Opportunity Cost of Producing Good a Is Defined to Be