opportunity cost

  

Definition

A benefit, profit, or value of something that must be given up to acquire or achieve something else. Since every resource (land, money, time, etc.) can be put to alternative uses, every action, choice, or decision has an associated opportunity cost.

Opportunity costs are fundamental costs in economics, and are used in computing cost benefit analysis of a project. Such costs, however, are not recorded in the account books but are recognized in decision making by computing the cash outlays and their resulting profit or loss.


Use opportunity cost in a sentence

  • The CEO of Ace Corporation considered the merger that the competing company offered him, but after examining the opportunity cost he decided that the sacrifices were too high and the benefits were too low to accept the deal.

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  • I would have gone to the movie since it cost less and the tickets were not refundable but I have to see this concert even if the opportunity cost doesn't make sense to most people.

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  • When deciding on whether or not to go back to college full-time, Jack included the opportunity cost of foregoing a stable paycheck in his decision.

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