The figure given below represents the PPC in two nations

Question

The figure given below represents the PPC in two nations - Germany and Korea, producing only two goods, cars and food.Figure 2.4
 
-Margaret can use her quarterly savings to buy a teakwood study table for her room or spend it on a small Christmas party with her family. The _____ cost of her enjoyment at the Christmas party would then equal the forgone utility of the study table.
A)transaction 
B)exchange 
C)opportunity 
D)direct 
E)sunk

Quizplus · Accepted Answer

The concept being described in the question is opportunity cost, which is the cost of choosing one option over another. In this case, choosing to have a Christmas party with her family means Margaret is giving up the opportunity to purchase a study table. Therefore, the best choice is option C, opportunity. The other options (transaction, exchange, direct, and sunk) do not accurately describe the situation being presented in the question.