[Jay]

I’ve read and understand opportunity cost, but one thing that escapes me is this:

Choice a) Produces income of 20,000
Choice b) Produces income of 18,000

Is it correct to assume the opportunity cost of choosing choice A is 2,000 (the difference between choosing the next best option)? or would it be 18,000?

Thanks!

All parts PASSED, freedom is beautiful!

[Anonymous]

Opportunity cost is the entire cost of the next best alternative being the 18,000.

[Jay]

Thank you alloutofkuai. I've seen that definition countless times in Wiley but I can't recall seeing an example.

https://www.investopedia.com/terms/o/opportunitycost.asp

The above link mentions in their example that (in my example) it'd be 2,000 so I was a bit confused. Thanks for the clarification!

All parts PASSED, freedom is beautiful!

[Author]

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