A forest is handed over to a paper mill. The local people can no longer collect fuelwood and fodder from it. In economics, the value of the use of the forest that has been given up is called its:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → opportunity cost
Opportunity cost is the value of the alternative given up. Giving the forest to the mill means giving up its use by local people for fuelwood and fodder. The value of that lost use is the forest’s opportunity cost.
Option (1) marginal cost — Incorrect. Marginal cost is the extra cost of producing one more unit of output.
Option (2) opportunity cost — Correct. It is the value of the use given up.
Option (3) fixed cost — Incorrect. Fixed cost is the cost a firm bears that does not change with output, such as rent.
Option (4) sunk cost — Incorrect. A sunk cost is money already spent that cannot be got back. It is not the value of a choice given up.
This question uses Environment and Sustainable Development and Introduction to Microeconomics together.
Note: The concept in Option (4), ‘sunk cost’, is not in the NCERT book (2026-27); it is explained here for the benefit of the students.
NCERT (2026-27): Glossary: “Opportunity Cost – It is defined with respect to a particular value or action and is equal to the value of the foregone alternative choice or action.” “7.2 Environment — Definition and Functions … Thus, it is clear that the opportunity costs of negative environmental impacts are high. …” |