Which of the following is the best definition of the opportunity cost of a decision?

1. Actual financial cost of a decision.

2. The sum of all benefits from all foregone alternatives.

3. The difference between the benefits of the first and second best choices.

4. Benefits from the best foregone alternative.

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Sonal BahlLv10

20 Oct 2020

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One often-used definition of the term opportunity cost is that it is something that is given up when a choice is made. An example would be the money from working full-time given up by going to school. I suggest using the definition that opportunity cost is in terms of the foregone benefits of the next best alternative that could have been chosen. If the choice is for going to school instead of working full-time, then the opportunity cost would be all the benefits you would enjoy from working full-time in addition to the income you would earn. Using examples from your experiences and what you know, in what manners does the suggested change in definitions offer advantages in evaluating potential outcomes of choices either you or society have to make? How does this second opportunity cost definition help you make better decisions?

The opportunity cost of an activity is
A) the sum of benefits from all of the sacrificed alternatives
B) the amount of money spent on the activity
C) zero if you choose the activity voluntarily
D) the value of the best alternative not chosen
E) the difference between the benefits and the costs of that activity