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Define Opportunity Cost and Explain its Relationship to Economics

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Define opportunity cost and explain its relationship to economic reasoning.

Give some examples.

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In economics, opportunity cost, or economic cost, is the cost of something in terms of an opportunity forgone (and the benefits that could be received from that opportunity), or the most valuable forgone alternative. For example, if a city decides to build a hospital on vacant land that it owns, the opportunity cost is some other thing that might have been done with the land and construction funds instead. In building the hospital, the city has forgone the opportunity to build a sporting center on that land, or a parking lot, or the ability to sell the land to reduce the city's debt, and so on.

Opportunity cost need not be assessed in monetary terms, but rather can be assessed in terms of ...

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