SIE Exam Question 977: Answer and Explanation

Question: 977

Delta Corporation has retained earnings of $100,000, and they plan to use the funds to either invest in common stock or hire two new employees. Assuming these are mutually exclusive events, which of the following refers to the potential benefit that is lost by choosing one of these options over the other?

• A. Budget constraint
• B. Opportunity cost
• C. Production-possibility frontier
• D. Prospect theory

Correct Answer: B

Explanation:

The potential benefit that is lost by choosing one option over another is referred to as the opportunity cost.