Which concept describes the opportunity cost?

Opportunity cost is defined as the loss of potential gain from other alternatives when one option is chosen over another. This concept emphasizes that whenever a choice is made, the benefits you forego from the next best alternative represent the opportunity cost of that decision.

In practical terms, if an individual decides to pursue one activity—such as attending college—they forgo the income they could have earned from working during that time. This lost income represents the opportunity cost of their decision to go to college instead of entering the workforce. Therefore, recognizing opportunity costs helps individuals and businesses make more informed economic decisions by considering what is sacrificed when one choice is made over others.

In contrast, the other options refer to tangible financial metrics or benefits rather than the concept of trade-offs inherent in decision-making, which is at the core of opportunity cost.