Madeleine allows herself $100 per month for purchasing coffee.The diagram below illustrates the choices available to her in each month. FIGURE 1-3
-Refer to Figure 1-3.If Madeleine chooses to allocate all $100 to buying lattes,we can say that her opportunity cost in one month is
A)zero because she bought what she desired.
B)zero because she stayed within her budget.
C)80 cups of regular coffee.
D)40 cups of regular coffee.
E)20 cups of regular coffee.

Question

Madeleine allows herself $100 per month for purchasing coffee.The diagram below illustrates the choices available to her in each month.  FIGURE 1-3
-Refer to Figure 1-3.If Madeleine chooses to allocate all $100 to buying lattes,we can say that her opportunity cost in one month is
A)zero because she bought what she desired. 
B)zero because she stayed within her budget. 
C)80 cups of regular coffee. 
D)40 cups of regular coffee. 
E)20 cups of regular coffee.

Quizplus · Accepted Answer

Opportunity cost is the value of the next best alternative foregone when a choice is made. If Madeleine chooses to spend all her $100 on buying lattes, then she would not be able to buy any regular coffee. Given that a regular coffee costs $1.25, she could have purchased 80 cups of regular coffee with the same amount of money. Therefore, her opportunity cost in one month is 80 cups of regular coffee. Choice C is the best choice because it correctly identifies the opportunity cost.

Madeleine Allows Herself $100 Per Month for Purchasing Coffee