What is opportunity cost?

• A. The monetary cost of the decision.
• B. The value of the next best alternative foregone when a decision is made.
• C. The price paid for a good in the market.
• D. The benefit gained from the chosen option.

Answer: (B)

Opportunity cost is the value of the next best alternative you give up when you make a choice. It isn’t just the money you spend or the price of something you buy; it’s what you could have obtained if you had chosen differently, including non-monetary benefits like time or satisfaction.

This is why the correct description fits best: it frames cost as the foregone benefit of the best alternative, not the explicit monetary outlay or the reward you actually receive. For example, choosing to spend time studying instead of working means you forgo the wages you could have earned; that foregone value is the opportunity cost. Similarly, spending money on one item means you’re sacrificing the next best alternative you could have bought with that money, not just the price tag you paid.

In short, opportunity cost focuses on the trade-off: what you give up by not choosing the best alternative.