Suppose you had $1,000 to spend.You choose to spend the money on new clothes rather than on a new surfboard,your second choice or 1,000 lottery tickets,your third choice.
A)Your opportunity cost of spending the money on clothes is the $1,000 spent.
B)Your opportunity cost of spending the money on clothes is not buying the surfboard.
C)Your opportunity cost of spending the money on clothes is not buying the surfboard and the lottery tickets.
D)There is no opportunity cost in this instance.

Question

Quizplus · Accepted Answer

Opportunity cost is the value of the next-best alternative forgone. In this case, the opportunity cost of spending $1,000 on clothes is not being able to spend it on a surfboard, which was the second choice. Choosing the lottery tickets would have a higher opportunity cost because the chance of winning is low, and the money could have been used for more certain alternatives like the surfboard or clothes. Therefore, the best choice is to spend the money on clothes, but recognizing the opportunity cost of not buying the surfboard.

Suppose You Had $1,000 to Spend