Opportunity Cost

Definition: Opportunity Cost is an economic term that refers to the advantages of the second best business alternative, which are forgone as a result of accepting the best alternative.
It is a term used in finance, to mean the cost of something in terms of an opportunity foregone (and the benefits that could be received from that opportunity), or the most valuable foregone alternative.
Also it can be used to refer to the value of the best alternative use of a resource. This consists of the maximum value of other outputs we could and would have produced had we not used the resource to produce the item in question.
See also Time Value of Money.

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