LA2 Maurice receives 100 as a birthday gift In deciding how

L.A2 Maurice receives $100 as a birthday gift. In deciding how to spend the money, he narrows his options down to four choices: Option A, Option B, Option C, and Option D. Each option costs $100. Finally he decides on Option B. The opportunity cost of this decision is (a) the value to Maurice of the option he would have chosen had Option B not been available. (b) the value to Maurice of Options A, C and D combined. (c) $100. (d) $300

Solution

Answer is a.

Opportunity cost is the value of the next best alternative foregone. If option B was not available he could have chosen some other option. The value of that option is the opportunity cost.

He cannot choose all three options as he does not have the money.