Consider the following statements regarding "Opportunity Cost": 1. If resources are used for corn, the production of cotton remains unaffected. 2. It is the cost of the next best alternative forgone. 3. It is a concept irrelevant to the society as a whole. Which of the statements given above is/are correct?

The correct option is 2 only Explanation Opportunity cost is a fundamental economic principle arising from the scarcity of resources (factors of production). It represents the potential benefits an individual, investor, or society misses out on when choosing one alternative over another. Statement-wise Analysis: - Statement 1 is Incorrect: Opportunity cost is formally defined as the value of the next best alternative forgone. It quantifies the trade-off involved in any decision where resources are limited. - Statement 2 is Correct: Resources (land, labor, capital) are scarce. If resources are diverted to produce corn, they are withdrawn from the production of other goods, such as cotton. Consequently, the production of cotton will decrease, not remain unaffected. This trade-off is often illustrated by the Production Possibility Frontier (PPF). - Statement 3 is Incorrect: The concept applies to all economic agents, including individuals, firms, and society as a whole. Societies must make choices on how to allocate limited resources (e.g., spending on defense versus healthcare), making the concept highly relevant at the macroeconomic level. Key Takeaway: Opportunity cost is the cost of the next best alternative sacrificed to pursue a certain action; it dictates that because resources are scarce, every economic choice involves a trade-off.

NCERT Class 12 Economics — Chapter 1: Introduction

mcqmedium

Consider the following statements regarding "Opportunity Cost":

If resources are used for corn, the production of cotton remains unaffected.
It is the cost of the next best alternative forgone.
It is a concept irrelevant to the society as a whole.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1, 2 and 3
B2 only
C1 only
D1 and 3 only

Did you get this right?

Solution

The correct option is

2 only

Explanation

Opportunity cost is a fundamental economic principle arising from the scarcity of resources (factors of production). It represents the potential benefits an individual, investor, or society misses out on when choosing one alternative over another.

Statement-wise Analysis:

Statement 1 is Incorrect: Opportunity cost is formally defined as the value of the next best alternative forgone. It quantifies the trade-off involved in any decision where resources are limited.
Statement 2 is Correct: Resources (land, labor, capital) are scarce. If resources are diverted to produce corn, they are withdrawn from the production of other goods, such as cotton. Consequently, the production of cotton will decrease, not remain unaffected. This trade-off is often illustrated by the Production Possibility Frontier (PPF).
Statement 3 is Incorrect: The concept applies to all economic agents, including individuals, firms, and society as a whole. Societies must make choices on how to allocate limited resources (e.g., spending on defense versus healthcare), making the concept highly relevant at the macroeconomic level.

Key Takeaway:

Opportunity cost is the cost of the next best alternative sacrificed to pursue a certain action; it dictates that because resources are scarce, every economic choice involves a trade-off.

Your note

More from Chapter 1: Introduction

Consider the following statements regarding the "Mixed Economy": 1. It is an economy where both the government and the market play a role in economic activities. 2. It is an economy where all decisions are taken solely by the market. 3. India is cited as an example of a mixed economy. Which of the statements given above is/are correct?

easy

Consider the following statements regarding the fundamental nature of an economy: 1. Individuals in a society possess limited resources compared to their needs. 2. The scarcity of resources is a phenomenon faced by individuals but not by the society as a whole. 3. Compatibility between what people collectively want and what they produce is essential for an economy. Which of the statements given above is/are correct?

medium

With reference to the basic economic activities, consider the following statements: 1. Production, exchange, and consumption are considered the basic economic activities of life. 2. The problem of choice arises primarily because resources have single, specific usages. Which of the statements given above is/are correct?

easy

Consider the following statements regarding the "Central Problems of an Economy": 1. The problem of "What is produced" is unrelated to the quantity of goods to be produced. 2. The problem of "How are these goods produced" relates to the choice of technology to be adopted. 3. The problem of "For whom are these goods produced" involves determining the distribution of final goods among individuals. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the allocation of resources: 1. In a market economy, allocation is determined solely by the central planning authority. 2. Allocation of resources refers to how much of which resource is devoted to the production of each good. 3. Allocation of resources has no impact on the combination of goods and services produced. Which of the statements given above is/are correct?

medium

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The correct option is

2 only

Explanation

Statement-wise Analysis:

Statement 1 is Incorrect: Opportunity cost is formally defined as the value of the next best alternative forgone. It quantifies the trade-off involved in any decision where resources are limited.
Statement 2 is Correct: Resources (land, labor, capital) are scarce. If resources are diverted to produce corn, they are withdrawn from the production of other goods, such as cotton. Consequently, the production of cotton will decrease, not remain unaffected. This trade-off is often illustrated by the Production Possibility Frontier (PPF).
Statement 3 is Incorrect: The concept applies to all economic agents, including individuals, firms, and society as a whole. Societies must make choices on how to allocate limited resources (e.g., spending on defense versus healthcare), making the concept highly relevant at the macroeconomic level.

Key Takeaway:

Opportunity cost is the cost of the next best alternative sacrificed to pursue a certain action; it dictates that because resources are scarce, every economic choice involves a trade-off.