A government spends $50 million building a new hospital. The next best use of that money was improving roads. What is the opportunity cost of building the hospital?

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Question

A government spends $50 million building a new hospital. The next best use of that money was improving roads. What is the opportunity cost of building the hospital?

Accepted Answer

The improved roads that were not built — The opportunity cost is the next best alternative foregone, which in this case is the road improvements that were sacrificed. Option A is the monetary cost, not the opportunity cost. Option B incorrectly identifies all possible alternatives rather than just the next best one. Option D refers to future costs, which are not the opportunity cost of the original decision.

Answer

The future running costs of the new hospital

Answer

The $50 million spent on the hospital itself

Answer

The improved roads that were not built

Answer

All the infrastructure projects that could have been funded

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