The correct option is 2 and 3 only.
Explanation
Opportunity cost is a fundamental economic concept defined as the value of the next best alternative forgone when a decision is made. It arises due to the scarcity of resources and the necessity of making choices.
Statement-wise Analysis:
- Statement 1 is Incorrect. Opportunity cost is not merely the monetary cost of purchasing a good. Instead, it specifically refers to the value of the alternative that is sacrificed to pursue a certain action. For example, if a person chooses to study instead of working, the opportunity cost is the wages lost, not the money spent on books.
- Statement 2 is Correct. The concept applies to both individuals and society.
- Individual level: A consumer chooses between goods based on limited income.
- Societal level: A nation must choose between producing different goods (e.g., "guns vs. butter") given limited resources. This is often depicted using the Production Possibility Frontier (PPF).
- Statement 3 is Correct. In economics, the true cost of any resource is its opportunity cost. Therefore, opportunity cost is often referred to as economic cost. This distinguishes it from accounting cost, which typically considers only actual monetary outflows (explicit costs) and ignores the value of forgone alternatives (implicit costs).
Key Takeaway:
Opportunity Cost is the potential benefit lost from the next best alternative when a choice is made. It is the basis of economic cost, which includes both explicit (monetary) and implicit (forgone) costs.