Opportunity cost for a firm is:
A)Costs that involve a direct monetary outlay
B)The sum of the firm's implicit costs
C)The total of explicit costs that have been incurred in the past
D)The value of the next best alternative that is forgone when another alternative is chosen

Question

Quizplus · Accepted Answer

Opportunity cost refers to the value of the next best alternative that is forgone when another alternative is chosen. It is not necessarily a direct monetary cost, but rather the value of the foregone opportunity. Opportunity cost for a firm is the value of the next best alternative that is forgone when another alternative is chosen. It represents the cost of making one choice over another and includes both explicit and implicit costs. Option A is incorrect as it only refers to explicit costs involving direct monetary outlay. Option B is incorrect as it only refers to implicit costs. Option C is incorrect as it refers to explicit costs that have already been incurred, rather than the cost of the next best alternative.

Opportunity Cost for a Firm Is