Opportunity Cost in Government Spending

Steps:

• Identify the choice: Norway spent oil profits on stocks, bonds, and property.
• Recognize the alternative: This meant forgoing improvements to domestic infrastructure.
• Link to economics: Choosing one option requires sacrificing another due to limited resources.
• Conclude the concept: This trade-off exemplifies opportunity cost.

Why C is correct:

• Opportunity cost is the value of the next best alternative forgone when making a decision, here the infrastructure improvements sacrificed for investments.

Why the others are wrong:

• A: Cost of production involves expenses to create goods, not trade-offs in spending choices.
• B: Finite resources describe limited availability, but not the specific sacrifice of one use for another.
• D: Production possibility frontier shows maximum output combinations, not a single spending decision's trade-off.

Final answer: C