In a choice between buying a video game now or saving for a bike next month, what expresses the idea of opportunity cost?

In a choice between buying a video game now or saving for a bike next month, what expresses the idea of opportunity cost?

• A. The money you have left after buying the game.
• B. The benefit you gain from the game you chose.
• C. The money spent.
• D. The value of the next best option you give up when you choose one thing over another.

Answer: (D)

Opportunity cost is the value of the next best thing you give up when you make a choice. In this scenario, if you buy the video game now, the next best option you’re giving up is saving for the bike next month and the benefits that bike would bring. So the opportunity cost is the value of that bike (or its benefits) you forgo by spending now on the game. Seeing it this way helps separate two ideas: what you spend (the money on the game) and what you miss out on by not choosing the alternative (the bike and what it would let you do). The money left over after buying the game isn’t the opportunity cost by itself, and the benefit you gain from the game isn’t about what you gave up—it’s the gain from the chosen option. The term “opportunity cost” specifically points to that forgone next-best option.

Opportunity cost is the value of the next best thing you give up when you make a choice. In this scenario, if you buy the video game now, the next best option you’re giving up is saving for the bike next month and the benefits that bike would bring. So the opportunity cost is the value of that bike (or its benefits) you forgo by spending now on the game.

Seeing it this way helps separate two ideas: what you spend (the money on the game) and what you miss out on by not choosing the alternative (the bike and what it would let you do). The money left over after buying the game isn’t the opportunity cost by itself, and the benefit you gain from the game isn’t about what you gave up—it’s the gain from the chosen option. The term “opportunity cost” specifically points to that forgone next-best option.