Opportunity Cost
Benefit foregone by choosing one option over another.
Formula
Opportunity Cost = Benefit of Next Best Alternative Foregone
Real World
When Nike invested heavily in its direct-to-consumer website, the opportunity cost was the wholesale revenue it sacrificed by reducing supply to retailers like Foot Locker.
Exam Focus
Always state what is foregone, not just that a choice was made — omitting the alternative is the most common reason marks are lost.
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