Opportunity cost definition.

• A. The price paid for a good
• B. The value of the next-best alternative foregone
• C. The total value of all production
• D. The cost of resources used in production

Answer: (B)

Opportunity cost is the value of the next-best alternative foregone when you make a choice. It’s not just the price you pay for something; it’s what you give up in terms of the benefit you could have gained from the best alternative use of your time, money, or resources. For example, if you spend an hour studying instead of working a part-time job, the opportunity cost is the wage you could have earned in that hour, plus any additional value from the alternative activity you forgo. In production, choosing to allocate resources to one good means you forego producing another good, and the value of that forgone production is the opportunity cost. The other options aren’t correct because they describe the price paid, the total value of all production, or the explicit cost of inputs, none of which capture the idea of what is sacrificed by not choosing the next-best alternative.