Opportunity Cost is best defined as what?

• A. Risk assessment
• B. The next-best alternative foregone
• C. Depreciation
• D. Total revenue minus costs

Answer: (B)

Opportunity cost is the value of the next-best alternative you give up when you make a decision. It measures what you sacrifice in terms of the benefits you could have gained from the best other option. This matters in decision-making because it helps compare options on a like-for-like basis. It isn’t about risk assessment, depreciation, or profit (revenue minus costs). For example, if you spend your resources on one project, the opportunity cost is the profit you could have earned from the next-best project you didn’t pursue.