Asked by Edith Anderson on Jul 06, 2024
Verified
The amount of income that would result from an alternative use of cash is called
A) differential income
B) sunk cost
C) differential revenue
D) opportunity cost
Opportunity Cost
The loss of potential gain from other alternatives when one alternative is chosen.
Differential Income
The difference in income between two alternatives, used in decision-making processes to determine the best option.
Alternative Use
Refers to the potential other uses or applications of an asset or resource outside its current employment.
- Understand the notions of sunk cost, differential cost, and opportunity cost as they relate to the decision-making process.
Verified Answer
NM
Nicole McNabbJul 10, 2024
Final Answer :
D
Explanation :
The amount of income that would result from an alternative use of cash is called opportunity cost. This is because when a decision is made to use cash for a certain purpose, it means that the opportunity to use that cash for an alternative purpose is foregone, and the income that could have been generated from that alternative use is the opportunity cost.
Learning Objectives
- Understand the notions of sunk cost, differential cost, and opportunity cost as they relate to the decision-making process.