Opportunity costs are:
A) Benefits foregone from one project because another project is chosen
B) Irrelevant
C) The same as sunk costs
D) Easy to value

Question

Quizplus · Accepted Answer

Opportunity costs refer to the benefits that are foregone from one project or decision because another alternative is chosen. It is important to consider opportunity costs in decision making as they represent the trade-offs that need to be made when resources are limited. Option B is incorrect as opportunity costs are not irrelevant, they are a crucial factor in decision making. Option C is also incorrect, as sunk costs are costs that have already been incurred and cannot be recovered, while opportunity costs are future benefits that could have been obtained. Finally, option D is incorrect as opportunity costs are often difficult to quantify or value.

Opportunity Costs Are