WAEC SSCE - Economics - 2011 (Objective)

Question 1 Report

The difference between the money cost and the real cost of any item is that

real cost is the alternative forgone while the money cost is the actual amount paid for buying the item

the real cost is the opportunity cost, while the money cost is the marginal cost

money cost is the opportunity cost, while the real cost is the actual cost in monetary terms

money cost is always greater than the real cost

Answer Details

The correct answer is: real cost is the alternative forgone while the money cost is the actual amount paid for buying the item. Money cost refers to the amount of money that is spent on a good or service. Real cost, on the other hand, refers to the alternative that must be given up in order to obtain that good or service. This alternative is often referred to as the opportunity cost. So, the real cost of an item is not just the amount of money that was spent on it, but also the value of the next best alternative that was given up to obtain it. For example, if you choose to buy a new phone for $500, the money cost is $500. However, the real cost also includes the opportunity cost of what else you could have done with that $500, such as investing it, saving it, or buying a different item.






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