Understanding Opportunity Cost

What is the primary concept of opportunity cost in decision-making?

• The direct financial cost of a decision

• The value of the next best alternative forgone

• The total resources available for a decision

• The immediate benefits of a decision

In the personal investment example, what is the opportunity cost of choosing stocks over property?

• The cost of property maintenance

• The risk of stock market fluctuations

• The immediate cash flow from stocks

• The potential rental income and property value increase

In the business resource allocation example, what is the opportunity cost of focusing on TV ads?

• The cost of producing TV ads

• The potential growth from online marketing

• The immediate sales increase from TV ads

• The brand recognition from TV ads

How does understanding opportunity cost contribute to economic efficiency?

• By maximizing the use of all available resources

• By avoiding waste on less productive uses

• By ensuring all decisions are risk-free

• By increasing the total budget for projects

Why is opportunity cost important in strategic planning?

• It focuses solely on reducing costs

• It guides towards maximizing long-term gains

• It helps in setting short-term goals

• It ensures immediate financial returns