Opportunity Cost
High School
Definition
The value of the next-best alternative given up when a choice is made. Because resources are scarce, every decision has an opportunity cost—for example, time spent studying is time not spent working.
Worked examples
Alex can either spend Saturday working a shift for $80 or going to a concert. If Alex chooses the concert, the opportunity cost is the $80 not earned.
The opportunity cost is the value of the next-best alternative—the forgone wages.
A government spends $5 billion building new highways instead of improving schools. The opportunity cost is the education improvements not made.
Resources used one way cannot be used another—opportunity cost applies to government choices too.
Common mistakes
- Opportunity cost is everything you give up when you make a choice. → Opportunity cost is only the value of the single next-best alternative. Count only the top forgone option, not all possible alternatives.
- If something is free, there is no opportunity cost. → Even free choices have opportunity cost—your time and attention are scarce resources. Opportunity cost includes time and other non-money resources you could have used differently.
- Opportunity cost is the same as monetary cost. → Opportunity cost is what you give up, which may include time, experiences, or other non-monetary values. Opportunity cost captures all forgone benefits, not just dollars spent.
Where you'll use it next
You'll apply opportunity cost when studying production possibilities, comparative advantage, cost-benefit analysis in economics, personal finance decisions, and evaluating trade-offs in policy and business.
See also
Reviewed by Pat Cheng, M.Ed. — StudyPug Curriculum Lead · Last updated June 6, 2026