Study guides & original practice
Opportunity cost practice
Opportunity cost is the value of the next-best alternative you give up when choosing. It is not the sum of every possible activity you could have done instead.
By ExamCat · Original study lesson · Published September 24, 2026
Understand the method
Identify feasible alternatives, then compare the chosen option with the best forgone one. Costs can include time and benefits as well as money. A sunk cost has already occurred and cannot be recovered by changing the current decision.
Worked example, step by step
A student can spend two hours tutoring for $30 or attend a free workshop they value more than earning $30. They choose the workshop.
- The feasible alternative is the tutoring session.
- The forgone earnings are $30.
- The workshop has no ticket price but still has an opportunity cost.
- The student can rationally choose it if its perceived benefit exceeds the value of the best alternative.
A mistake to watch for
“Free” in money does not mean costless in time. Also avoid adding the value of several mutually exclusive alternatives together; the student could not have done all of them during the same two hours.
Try it yourself: three questions
Write an answer before opening the explanation. For calculations, keep your units and intermediate steps; for concepts, state the reason for your choice.
1. You choose studying over your next-best option of working for $20. What monetary benefit is forgone?
Show answer and explanation
$20. This describes the forgone job benefit, not a universal dollar value of studying.
2. Does a nonrefundable ticket purchased yesterday necessarily justify attending today?
Show answer and explanation
No. Its price is sunk. Compare today’s remaining benefits and costs, including the best available alternative.
3. Why can different people face different opportunity costs for the same event?
Show answer and explanation
Their alternatives, constraints and valuations differ. The same time slot may replace work for one person and leisure for another.
Build your next practice session
Mark the first step where your reasoning differed from the explanation. Turn that step into a question, answer it without looking, then change one condition in the example and explain what would change. A correct guess is a reason to revisit the method.
Use the free flashcard maker for your own question-and-answer pairs, or bring your course material into PDF-to-flashcards practice.
Further reading
OpenStax Principles of Economics 3e provides textbook background. The worked scenario and practice questions on this page were written independently for ExamCat.
Related lessons
Practice your own class material
Generate flashcards, notes and quizzes from your lecture notes in Exam Cat.
Try 7 days free ↗Yearly plan: 7 days free, then $39.99/year. Cancel before the trial ends to avoid a charge.
APUSH study guide · Biology study guide · APUSH practice · All study tools