Question

Opportunity costs are:

A. included in inventory.
B. foregone benefits.
C. sunk costs.
D. included in cost of goods sold.

Answer 1

Opportunity costs represent the benefits one foregoes by choosing one option over another, such as the bus tickets Alphonso gives up for a burger.

Step-by-step explanation:

Opportunity costs are defined as the foregone benefits or alternatives a person gives up when choosing one option over another. Unlike monetary costs, they are not recorded on financial statements but are important for decision-making.

For example, if Alphonso chooses to buy a burger, the opportunity cost is the four bus tickets he could have purchased instead. This choice depends on whether the value of the burger outweighs the value of the bus tickets he has to give up. Opportunity costs measure the cost by what we forgo and may include time, money, or other resources.