Opportunity Cost

Statement

Opportunity cost is the value of the next best alternative forgone when a choice is made.

Notes

Opportunity cost arises directly from scarcity: because resources are limited, committing them to one use means giving up the next best use. It counts only the single next best alternative forgone — not the sum of all alternatives given up. How to deploy it in an answer — naming the resource, the next best alternative, and its value — is set out in applying opportunity cost; geometrically, it is measured by the slope of the production possibility curve.