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Difficulty: EasyOpportunity Cost

Tunde has ₦50,000₦50,000 saved and must choose between buying a laptop needed for an online coding course and buying a smartphone for personal entertainment. If Tunde decides to purchase the laptop, what is the opportunity cost of his decision?

  1. The smartphone foregoneAnswer
  2. B
    The ₦50,000₦50,000 cash spent on the laptop
  3. C
    An outward shift in Tunde's production possibility curve
  4. D
    The total combined value of both the laptop and the smartphone

Answer

The smartphone foregone
Opportunity cost, also known as real cost, refers to the next best alternative foregone when a choice is made under conditions of scarcity. By choosing to purchase the laptop, the satisfaction derived from the smartphone is sacrificed, making the smartphone foregone the opportunity cost.

Step-by-Step Solution

1
Identify the choice made and the sacrificed alternative
Tunde selected the laptop, leaving the smartphone as the unchosen option.
Opportunity cost measures the sacrifice incurred by choosing one item over another.
2
Distinguish real cost from money cost
The real cost is the smartphone given up, while the ₦50,000₦50,000 is the monetary expense.
In economics, opportunity cost is expressed in terms of goods/services foregone rather than money spent.

Key Concept

Opportunity Cost
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Topics

Opportunity Cost

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