Define opportunity cost and provide an example. – InterviewSolution

1.	Define opportunity cost and provide an example.
Answer» Opportunity cost is the cost of the next best alternative use. It is the value of the next best alternative foregone. (Eg.) A farmer can cultivate both paddy and sugarcane in farmland. If he cultivates paddy, the opportunity cost of paddy output is the amount of sugarcane output given up. Opportunity cost is also called as ‘Alternative cost’ or ‘Transfer cost’.

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