Chapter 1.2, Problem 2R

To determine

To explain: The opportunity cost of any trade-off.

Explanation of Solution

The economic choices made by people involve the exchange of one good or service for another. This exchange of one good or service for another is called a Trade-off.

The opportunity cost of any trade-off will be the most preferred possible alternative. In a trade-off, a person has to make a sacrifice of his good or service to get another commodity. For example, if a person has two options; to buy a computer or to buy a mobile phone. In this case, if the person buys (trade-off) the computer then the opportunity cost of the computer is the cost of the mobile phone.