Question

One of your classmates, Madison, is a hardworking student, is serious about her classes, and is conscientious about her grades. Madison is also involved, however, in volunteer activities and an extracurricular sport. If Madison's goal is to get good grades, what is her opportunity cost when she is involved in other activities? If Madison's goal is to be involved in volunteer activities and sports, what is her opportunity cost when she spends her time studying?

Answer 1

Opportunity cost is the value of the next best alternative foregone.

If Madison is involved in volunteering and other activities, then her opportunity cost is the value of the next best alternative, which is, studying and getting good grades. It is the value of good grades that is now foregone.

If Madison is studying then her opportunity cost is the value of the volunteering work that is foregone. The value would be how much goodness she would have created.