Opportunity Cost
Opportunity Cost is the cost of forgoing the next best alternative when making a decision.
Benefits
Understanding opportunity cost helps in making informed decisions, evaluating trade-offs, and optimizing resource allocation by considering what is sacrificed when choosing one option over another.
Frequently Asked Questions
Is opportunity cost the value of the next best alternative when a decision is made?
Yes, opportunity cost is the value of the next best alternative that is forgone when a decision is made.
What is the cost of foregoing the next best alternative?
The cost of foregoing the next best alternative is known as the opportunity cost, representing the benefits that could have been gained from that alternative.
Why is opportunity cost the best forgone alternative?
Opportunity cost is considered the best forgone alternative because it measures the value of the next best option that is sacrificed when a choice is made, helping to understand the trade-offs involved in decision-making.
Key Takeaway
Opportunity Cost represents the value of the next best alternative forgone when making a decision, highlighting the trade-offs involved and aiding in better decision-making.