Question

Suppose a food pantry received a donation and allowed volunteers to vote on how the funds were to be spent. Three options were provided, with the donation only covering the cost of one project. The projects included improvements to the building, additional purchases of food, and purchasing a vehicle for food delivery. The majority of volunteers voted for purchasing a vehicle for food delivery with building improvements coming in second. Since only one project could be funded, what is the opportunity cost of the decision to purchase a vehicle

Answer 1

Answer:

improvements to the building,

Explanation:

Opportunity cost is the foregone advantage of not setting certain options in decision making. When a particular option is preferred over others, then benefit from the other options not selected are forfeited. The forfeited benefits represent the opportunity cost.

The value of opportunity cost is equated to the value of the next best alternative. Where there were more than two alternatives available, the next best alternative from the chosen option becomes the opportunity cost. In this case, improvement to the building was voted the second preferred option; hence it becomes the opportunity cost.