Opportunity Cost

Accounting Dictionary

Opportunity Cost

Opportunity Cost is the income you lose by choosing one investment over another.

Let’s say you have a chance to invest $10,000 in a new business. If you didn’t invest in that business, you could put the $10,000 in the bank and earn 2% interest. .02 x $10,000 =$2,000. $2,000 is the opportunity cost. By investing in the new business, you lost the opportunity to earn $2,000.

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