Which of the following best defines the concept of 'opportunity cost'?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. The next best alternative foregone.
Opportunity cost is a fundamental principle in economics representing the value or benefit lost when choosing one alternative over another. Since resources (time, money, labor) are scarce, every decision involves a trade-off.
For instance, if you spend an hour studying, the opportunity cost might be the sleep or leisure time you gave up. It is not necessarily the financial cost, but the value of the highest-valued alternative that was not chosen.