Management Glossary

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opportunity cost
The amount forfeited by choosing one course of action that excludes other actions. For example, imagine that you are considering two and only two opportunities, "A" and "B", but can only undertake one of them. If "B" would show a profit of $1,000, then the opportunity cost of choosing "A" is $1,000, the amount forgone by choosing "A" rather than "B".

If you are considering several options and can only choose one, the opportunity cost of any one option is the potential profit of the most profitable of the other options.
Contributed by: ManagerWise Staff

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