Question

select the correct answer.

nick won a $1,000 lottery prize. he cant decide what he should spend the money on. for some time now, he has been planning to buy a gaming console, a bicycle, and a watch. but he also needs to save money for an overseas trip in the future.

he can give up the bicycle and the watch, but he really wants that gaming console. on the other hand, he also wants to experience a foreign culture. in the end, he decides to save the whole amount for the trip.

which item is the opportunity cost of nicks trip?

a. bicycle
b. gaming console
c. overseas trip
d. $1,000

Explanation:

Opportunity cost is the value of the next - best alternative forgone when a decision is made. Nick decided to save the $1000 for the overseas trip. The next - best alternative he gave up was buying the gaming console (since he really wanted it and was willing to give up the bicycle and watch but still considered the gaming console). The bicycle and watch were already less preferred as he was willing to give them up, the overseas trip is the choice he made, and $1000 is the amount of money, not an item forgone.

Answer:

B. gaming console