Explain opportunity cost using the following examples. Make up whatever details
seem appropriate.
a. Ned buys new guitar that cost $800.
b. Cersei is living on a fixed income and chooses to buy less food one week in order
to pay for her prescription medications.
c. Daenerys wants to sign up for the MW 9:35am ACC 203 Cost Accounting section
at LCCC but unfortunately it is scheduled at the same time that Professor Plaksa’s
Macroeconomics course is being offered. Daenerys enrolls in Cost Accounting.

Opportunity cost of the next best option forgone when one alternative is chosen over other alternatives. Opportunity cost is also known as implicit cost. Opportunity cost arises because humans wants are without limits and the resources (e.g. time, money) needed to meet the needs are available in limited quantities.

When Deanery chooses the cost accounting class, she would not be able to attend the macroeconomics class also. Thus, Deanery is forgoing the macroeconomics class. This is her opportunity cost.

Cersei is sacrificing more food for prescription medication. The food he could have consumed represents the opportunity cost.

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