Question

Which situation best illustrates the economic concept of opportunity cost?

Answer 1

Answer:

B. A business gives its employees a raise, so it cannot afford to buy any TV ads.

Explanation:

Opportunity cost also known as the alternative forgone, can be defined as the value, profit or benefits given up by an individual or organization in order to choose or acquire something deemed significant at the time.

Simply stated, it is the cost of not enjoying the benefits, profits or value associated with the alternative forgone or best alternative choice available.

For instance, if you decide to invest resources such as money in a paying your employees (workers), your opportunity cost would be the benefits like increased sales you could have earned if you had invested the same amount of resources in advertising your business.

Hence, the situation which best illustrates the economic concept of opportunity is when, a business gives its employees a raise, so it cannot afford to buy any TV ads.