Your Aunt gives you some money for your birthday and you decide to put it into your savings account instead of spending it. The trade-off of not being able to spend the money now is this decision's ________ cost.

Question

Quizplus · Accepted Answer

The concept of opportunity cost refers to the benefits that are foregone by choosing one alternative over another. In this case, the opportunity cost of putting the money in the savings account is the immediate satisfaction of spending it. This is because choosing to save the money means foregoing the opportunity to enjoy the benefits of spending it in the present. The other options (fixed, variable, transaction, and total costs) do not accurately describe the type of cost associated with this decision.

Your Aunt Gives You Some Money for Your Birthday and You