The opportunity cost of making a component part in a factory with no excess capacity is the:
A) variable manufacturing cost of the component.
B) fixed manufacturing cost of the component.
C) cost of the production given up in order to manufacture the component.
D) net benefit foregone from the best alternative use of the capacity required.

Question

Quizplus · Accepted Answer

Opportunity cost is the cost of the production given up in order to manufacture the component. In a factory with no excess capacity, the opportunity cost of making a component part is the net benefit foregone from the best alternative use of the capacity required. Therefore, the correct answer is D.

The Opportunity Cost of Making a Component Part in a Factory