Opportunity Cost as Total Forgone Revenue Over Five Years

Steps:

• Identify the next best alternative to producing X: producing Y.
• Determine annual revenue of Y: $18,000.
• Multiply by the time period: $18,000 × 5 years =$90,000.
• This total represents the opportunity cost of choosing X.

Why C is correct:

• Opportunity cost is the total value of the forgone alternative (revenue from Y over 5 years), calculated as $18,000 × 5 =$90,000.

Why the others are wrong:

• A: Reflects only annual revenue of Y, ignoring the 5-year horizon.
• B: Equals annual revenue of X, which is the benefit gained, not forgone.
• D: Equals total revenue of X over 5 years ($20,000 × 5), unrelated to the alternative.

Final answer: C