If we want to have more of one of the goods, we will have less of the other good. Thus, there is always a cost of having a little more of one good in terms of the amount of the other good that has to be forgone. What is this cost known as?

Opportunity Cost.

The correct answer is Option (2) → Opportunity Cost.

When we choose to produce or consume more of one good, we must give up some amount of another good due to limited resources. The value of what we forgo is called the opportunity cost. It represents the next best alternative sacrificed when a choice is made. For example, if resources are shifted from producing cloth to producing wheat, the amount of cloth forgone is the opportunity cost of the extra wheat produced.