Gwen had only $10 yesterday.She was uncertain whether to go out for lunch or to buy beer.In the end,she bought beer.Which of the following statements is correct?
A)The choice of the beer and not lunch is an example of constant costs.
B)The cost of buying beer is less than lunch.
C)The opportunity cost of beer is lunch.
D)The opportunity cost of beer is $10.

Question

Quizplus · Accepted Answer

The opportunity cost of an action is the value of the next best alternative that must be given up. In this case, Gwen gave up the opportunity to buy lunch when she chose to buy beer. Therefore, the correct statement is that the opportunity cost of beer is lunch.

Gwen Had Only $10 Yesterday