AP Micro & MacroCore Economic Concepts
Opportunity Cost
Opportunity cost is the value of the next-best alternative you give up when you make a choice.
Because resources are scarce, every choice means forgoing something else, and economists count only the next-best forgone option. Opportunity cost includes both explicit costs (money paid) and implicit costs (forgone earnings or benefits). This is why economic cost can be larger than simple accounting cost.
Formula / Example
Opportunity cost = value of the next-best alternative forgone. Example: studying for an hour instead of working a $15/hr job has a $15 opportunity cost.
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