The opportunity cost of an action is equal to:
A)the monetary payment received for the action.
B)the total time spent by all parties in carrying out the action.
C)the highest valued opportunity that must be sacrificed in order to take the action.
D)the value of all of alternative actions that could have been taken.
E)zero if the action yields an income.

Question

Quizplus · Accepted Answer

Opportunity cost is the highest valued alternative that must be forgone in order to undertake a certain action. Therefore, the correct answer is C. Choice A is incorrect because monetary payment received for an action does not represent opportunity cost. Choice B is not true because time spent does not necessarily equate to opportunity cost. Choice D is incorrect because it is the value of all alternative actions, not just some, and this falls short of opportunity cost. Choice E is incorrect because the fact that an action yields an income does not make its opportunity cost equal to zero.

The Opportunity Cost of an Action Is Equal To