Which statement represents a rational application of opportunity cost?
A) The value of the choice must be greater than or equal to the cost of the next-best alternative.
B) The value of the next-best alternative must be greater than or equal to the cost of the choice.
C) Opportunity cost is useful for evaluating a decision after the fact,but not during the decision-making process.
D) The value of the choice must be greater than the sum of all available alternatives.
E) The value of the next-best alternative is irrelevant since the alternative was not selected.

Question

Quizplus · Accepted Answer

Opportunity cost is the value of the next-best alternative when a decision is made; thus, for a choice to be rational, its value should be greater than or equal to the cost of the next-best alternative. This ensures that the chosen option provides at least as much value as the option forgone.

Which Statement Represents a Rational Application of Opportunity Cost