A government decides to build a sports stadium rather than affordable housing. Which of the following correctly describes the opportunity cost?
Question 1 Report
A government decides to build a sports stadium rather than affordable housing. Which of the following correctly describes the opportunity cost?
Answer Details
The correct answer is the affordable housing that cannot now be built. Opportunity cost is the value of the next best alternative forgone. By choosing to build the stadium, the government uses resources that could have gone toward affordable housing. The housing that cannot be built represents the true opportunity cost.
The construction cost of the stadium is a direct monetary cost, not an opportunity cost. The revenue from ticket sales describes the benefit of the chosen option. The cost of land is a factor of production cost, not the forgone alternative use of the budget.
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