Chapter 1, Problem 4AA

To determine

To find the option that best completes the sentence.

Answer to Problem 4AA

The opportunity cost of a trade-off is the value of the next best alternative that had to be given up.

Explanation of Solution

The opportunity cost the next best alternative that has to be sacrificed in order to prefer a particular good.

Hence, if a person has to do a trade-off between two goods, one has to give up the next best alternative of a choice.

For example, if a consumer has two options, either to purchase a head phone or to purchase two pen drives. So, if one chooses to purchase a head phone, one has to give up two pen drives. So, both of these are the alternatives of each other.