The Opportunity Cost of an Alternative

question 120

Multiple Choice

The opportunity cost of an alternative

• A) includes only the direct monetary cost of whatever is chosen.
• B) is subjective and can only be determined by the person who chooses the alternative.
• C) is the value of all alternatives that must be forgone as the result of the choice.
• D) is relevant only in cases where the choice involves alternatives that would be considered undesirable.

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Definitions:

Arbitrage

The simultaneous buying and selling of assets in different markets to exploit price differences for profit.

Elasticity of Demand

A gauge for the responsiveness of how much a product is wanted relative to fluctuations in its price.

Inelastic Demand

A market situation where the demand for a product does not significantly change with a change in price.

Elastic Demand

A market condition where the demand for a product or service significantly changes in response to price changes.