10

Set 2: Central Ideas (Intermediate)

Explanation

Answer: D

PASSAGE

The following text describes the concept of 'opportunity cost' in decision making. (Note: Similar topic to set-5 but deeper analysis). While often defined simply as the value of the foregone alternative, valid opportunity cost analysis requires that the alternatives be mutually exclusive. One cannot 'spend' the same hour both studying and sleeping. Furthermore, opportunity cost is subjective; it depends on the value the individual decision-maker places on the alternative. What one person considers a high cost (missing a party), another might consider a benefit (avoiding a social gathering).

What additional nuance about opportunity cost does this text provide?

A. It is an objective monetary value fixed by the market
B. It implies that one can pursue multiple options simultaneously
C. It is subjective and depends on mutually exclusive alternatives
D. It is a concept that only applies to businesses, not individuals✓ Correct

Detailed Explanation

Choice C is correct. The text adds that it 'requires that the alternatives be mutually exclusive' and that 'opportunity cost is subjective.'

Key Evidence:

• "alternatives be mutually exclusive"

• "opportunity cost is subjective"

Why others are wrong: A (Opposite (text says it is subjective)), B (Opposite (must be mutually exclusive)), D (Not mentioned (example uses individuals)).

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