The opportunity cost of using a building owned by a firm for its own production is:
Correct answer: B. The next-best use forgone
- A. The historical purchase price only
- B. The next-best use forgone
- C. The firm's total fixed cost
- D. The building's physical depreciation
Explanation
Opportunity cost is the value of the best alternative that is sacrificed. Even without an explicit cash payment, the firm gives up the rent or other return it could have earned from the building.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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