Question

You order a $40 Andy Warhol print online for a Valentine's Day gift. There's a standard shipping charge of $10, but you see that orders of $45 or more ship for free. You could also order a $5 pair of socks, but you're not sure the gift recipient would like them N you decide to order the socks. Your decision is an example of 

Choose one: A marginal thinking B. trade-offs C. opportunity costs  D. incentives. 

Answer 1

Opportunity cost. Opportunity cost is the value of the next best alternative that is foregone. Trade-offs create opportunity cost.

Here, you are trying to make a trade off between buying the pair of socks, which would entail free delivery charge and not buying the pair of socks which would incur $10 delivery charge. The opportunity cost of buying the pair of socks is the value that is foregone, i.e. the gift recipient  may not like it.