Which statement best defines opportunity cost?

• A. The total amount of money you have
• B. The price of an item plus sales tax
• C. The value of the next best alternative you give up when you make a choice
• D. The interest earned on your savings

Answer: (C)

Opportunity cost is the value of the next best thing you give up when you make a choice. It helps you measure what you’re giving up in order to have something else, using your limited resources like money or time. For example, if you spend money on a movie, the opportunity cost is what else you could have done with that money—like saving it for a future goal or buying a different item. In this question, the best statement captures that idea: it describes the value of the next best alternative you give up because you chose something else. The other choices describe amounts or returns (how much money you have, the price of something with tax, or interest on savings) rather than the trade-off you face when making a choice.