Real cost is

Analyze the question: The question asks for the meaning of "real cost" in Economics. Note that it's about real cost, not money cost.

Explain the concept: In Economics, costs can be viewed in two ways:

• Money (nominal) cost: The actual amount of money spent to produce or buy a good or service.
• Real cost: The sacrifice or opportunity given up in producing or acquiring something. It is measured in terms of the alternatives forgone, not in naira. This is closely related to opportunity cost.

For example, if a farmer uses his land to grow yam instead of cassava, the real cost of the yam is the cassava he could have grown and gave up.

Go through the options:

• A. Alternative commodities forgone: This matches the definition of real cost (the sacrifice of the next best alternative). ✔
• B. Amount of money spent on goods and services: This describes money cost or expenditure, not real cost.
• C. Cost of goods and services: This is too general and does not distinguish real cost from other types of cost.
• D. True cost: This only repeats the word "real" with a synonym. It does not explain the concept, so it is not the best answer.

Answer: The correct option is A. Alternative commodities forgone.

Exam tip: Remember the link: Real cost = Opportunity cost = what you give up. If you see "money cost" or "expenditure," think of nominal cost. If you see "forgone," "sacrifice," or "alternative," think of real or opportunity cost.