Which option best describes the term "opportunity cost"?

The term "opportunity cost" refers to the value of the next best alternative that is forgone when a decision is made to choose one option over another. In decision-making, when an individual or business selects a particular choice, they often give up other opportunities that might have been valuable. This concept emphasizes that every choice carries a cost in terms of what is sacrificed.

For instance, if you decide to invest your time in studying for a test rather than working at a job, the opportunity cost would be the wages you could have earned during that time. This idea encourages individuals and businesses to consider not just the financial costs of their decisions, but also what they are giving up by not pursuing other options that might have yielded different benefits or rewards.

Thus, the chosen option effectively captures the essence of opportunity cost as it highlights the trade-offs inherent in making choices in economics.