Opportunity cost exists because of scarcity, which means resources are limited and choices must be made between alternatives. This applies to both consumption and production decisions and is not the same as monetary costs. The concept of opportunity cost is relevant for all economies, regardless of their level of wealth.

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Opportunity Cost

Question 49

Multiple Choice

Opportunity cost:

A) applies only to consumption decisions.
B) applies only to production decisions.
C) is the same as monetary costs.
D) exists because of scarcity.
E) is irrelevant for wealthy economies.

Correct Answer: