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A village council has enough funds for either a new community hall or a drainage improvement project, but not both. If it chooses drainage, what does the opportunity cost represent?

Answer and explanation

Correct answer: The value of the community hall benefits given up by choosing drainage

Opportunity cost is the value of the next best alternative that is sacrificed when a choice is made. With funds available for only one project, choosing drainage means giving up the benefits that the community hall could have provided.

Related tags

Opportunity CostResource ScarcityPublic ExpenditureEconomic Choices

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