What is defined as the cost of not being able to do something else with the sum of money in question?

What is defined as the cost of not being able to do something else with the sum of money in question?

• A. The opportunity cost
• B. Profit
• C. Revenue
• D. Interest

Answer: (A)

The main idea is opportunity cost—the value of the next best use of money that you give up when you choose one option over another. When you decide how to use a sum of money, you’re forgoing the benefits you would have gained from the alternative use, and that forgone benefit is the opportunity cost. For example, if you invest in new equipment, you might be giving up the chance to spend that money on marketing; the potential gains from marketing represent the opportunity cost of buying the equipment. This concept isn’t about profit, revenue, or interest. Profit is what’s left after costs, revenue is total income from sales, and interest is the cost or return related to borrowing or lending money. The statement describes the opportunity cost since it’s the cost of not being able to do something else with the money.

The main idea is opportunity cost—the value of the next best use of money that you give up when you choose one option over another. When you decide how to use a sum of money, you’re forgoing the benefits you would have gained from the alternative use, and that forgone benefit is the opportunity cost. For example, if you invest in new equipment, you might be giving up the chance to spend that money on marketing; the potential gains from marketing represent the opportunity cost of buying the equipment. This concept isn’t about profit, revenue, or interest. Profit is what’s left after costs, revenue is total income from sales, and interest is the cost or return related to borrowing or lending money. The statement describes the opportunity cost since it’s the cost of not being able to do something else with the money.