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Difficulty: EasyOpportunity Cost

Ada has ₦5,000 and must choose between buying a set of past examination questions or a new school bag, both priced at ₦5,000. If she decides to purchase the past examination questions, what is the opportunity cost of her decision?

  1. A
    The ₦5,000 cash paid for the examination questions
  2. The school bag foregoneAnswer
  3. C
    The combined value of both the examination questions and the school bag
  4. D
    An outward shift of her production possibility frontier

Answer

The school bag foregone
Opportunity cost (or real cost) refers to the next best alternative foregone when a choice is made under conditions of scarcity. In this scenario, purchasing the past examination questions means Ada must give up the school bag. Therefore, the school bag represents the opportunity cost of her decision.

Step-by-Step Solution

1
Identify the options available and the decision taken
Ada chose the set of past examination questions over the school bag.
Determining opportunity cost requires evaluating the selected choice against the alternative available.
2
Determine the alternative that was sacrificed
The sacrificed alternative is the school bag.
Opportunity cost is defined as the real commodity or opportunity foregone when a choice is made.

Key Concept

Opportunity Cost
Estimated Time:45s
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Opportunity Cost

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