If a farmer produces wheat, which fetches $200 per quintal, instead of producing rice which would have fetched $180 per quintal and gram $160 per quintal. What is the opportunity cost of the farmer of producing wheat?

$180

The correct answer is Option 2: $180

Opportunity cost is the value of the next best alternative foregone when making a choice.

• The farmer chooses to produce wheat ($200 per quintal).
• The other two options were:
  • Rice → $180 per quintal
  • Gram → $160 per quintal

Since rice would have fetched the highest price among the alternatives, the best alternative foregone is rice at $180 per quintal.