Ed spends an hour studying instead of watching tv with his friends.The opportunity cost to him of studying is
A) the improvement in his grades from studying for the hour.
B) the improvement in his grades from studying minus the enjoyment of watching tv.
C) the enjoyment he would have received if he had watched tv with his friends.
D) zero. Since Ed chose to study rather than to watch tv, the value of studying must have been greater than the value of watching tv.

Question

Quizplus · Accepted Answer

The opportunity cost of an action is the benefit forgone from the next best alternative action. In this case, the next best alternative action was watching TV with friends, which would have given Ed enjoyment. Since he chose to study instead, the opportunity cost to him is the enjoyment he would have received if he had watched TV with his friends. Therefore, the correct choice is C. Option A is not the opportunity cost because it is a direct benefit from the action taken. Option B includes a benefit (improvement in grades) in the opportunity cost calculation, which is incorrect. Option D is incorrect because opportunity cost is not a measure of value, but rather the foregone value of an alternative action.

Ed Spends an Hour Studying Instead of Watching Tv with His