Opportunity cost is defined as what?

• A. The value of the next-best alternative forgone.
• B. The total cost of all options.
• C. The monetary price paid for goods.
• D. The reward for being productive.

Answer: (A)

Opportunity cost is the value of the next-best alternative you give up when you make a choice. It captures what you sacrifice in order to gain something else, including time, money, or other benefits. For example, studying for an hour instead of working has an opportunity cost equal to the wage you could have earned or the leisure you could have enjoyed. When you spend money, the opportunity cost is what else you could have done with that money. This idea focuses on the benefits you forego, not just the price paid or the total cost of all options, and it isn’t a reward for productivity.