Asked by ESTELA LUCCHESI on Jul 14, 2024
Verified
Opportunity cost of an activity
A) Is included in accounting costs
B) Does not include monetary costs
C) May include both monetary costs and foregone incomes
D) Is known with certainty
Opportunity Cost
represents the value of the best alternative foregone as a result of making a particular choice.
Accounting Costs
Represent the explicit costs or direct financial expenditures associated with the operations of a business.
Monetary Costs
The financial expenses incurred in the acquisition of goods, services, or assets, measured in units of currency.
- Ascertain and interpret the principle of opportunity cost involved in decision-making.
- Appreciate the role opportunity costs play in estimating economic profits.
Verified Answer
OO
Oskarsson, OliviaJul 19, 2024
Final Answer :
C
Explanation :
Opportunity cost refers to the cost of foregone opportunity or alternative. It may include both monetary costs as well as the foregone income that could have been earned by pursuing an alternative activity. Therefore, option C is the correct choice. Option A is incorrect because accounting costs only consider the monetary expenses incurred for an activity. Option B is incorrect as opportunity cost may include monetary costs. Option D is also incorrect as opportunity cost cannot be known with certainty as it is based on assumptions and judgments about the alternatives.
Learning Objectives
- Ascertain and interpret the principle of opportunity cost involved in decision-making.
- Appreciate the role opportunity costs play in estimating economic profits.