What term refers to the highest valued alternative that is forgone in decision making?

Opportunity cost refers to the highest valued alternative that is forgone when a decision is made. In economics, it embodies the concept that every choice has an implicit cost associated with the lost benefits of the next best alternative that is not chosen. By focusing on opportunity cost, individuals and businesses can better assess the true cost of their decisions and prioritize their resources effectively. Understanding this concept is essential for making informed choices in both personal and professional environments, as it illustrates the potential benefits that are sacrificed when opting for one path over another.

In contrast, sunk cost refers to expenses that have already been incurred and cannot be recovered, which should not influence future decisions. Variable cost is associated with costs that change with the level of output produced, while a trade-off is a general term that describes the act of giving up one thing to obtain another, but does not specifically capture the concept of the highest valued sacrifice.