An economy has to choose one of the many possibilities that it has at given resources. Therefore, the cost of an additional unit of X commodity in terms of the amount of the Y commodity that has to be forgone is called _____ cost.

Opportunity

The correct answer is Option (1) → Opportunity

When an economy uses its limited resources to produce more of one good (X), it must reduce the production of another good (Y). The cost of producing one additional unit of X in terms of the amount of Y forgone is known as opportunity cost. This concept is central to the study of economics and is graphically represented by the Production Possibility Curve (PPC).

Why Not Economic Cost? 

Economic cost and opportunity cost are related terms. Opportunity cost specifically means the value of the next best alternative foregone, whereas economic cost is a broader concept that includes both explicit costs (actual cash payments) and implicit costs (opportunity costs). In this question, the phrase “the amount of Y commodity that has to be forgone” directly refers to the sacrifice of an alternative, which is the textbook definition of opportunity cost.