Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The cost of the next best alternative foregone
B
The total revenue generated from sales
C
The explicit costs incurred in production
D
The net profit after all expenses
Understanding the Answer
Let's break down why this is correct
Answer
Opportunity cost in economics refers to the value of the next best alternative that you give up when making a decision. When calculating profit, it’s important to consider not just the money earned, but also what you could have earned if you had chosen a different option. For example, if you start a business and invest $10,000, the opportunity cost includes the salary you could have earned if you worked for someone else during that time. This means that to accurately calculate your profit, you need to subtract both your expenses and the opportunity cost from your total earnings. Understanding opportunity cost helps you make better decisions by recognizing what you might be sacrificing for your current choice.
Detailed Explanation
Opportunity cost is what you give up when you choose one option over another. Other options are incorrect because Some might think opportunity cost is just about total sales money; People may confuse opportunity cost with direct costs of making a product.
Key Concepts
implicit costs
Topic
Opportunity Cost in Profit Calculation
Difficulty
easy level question
Cognitive Level
understand
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