If you have $20 and spend $12 on a game, what is your opportunity cost?

• A. The $12 you spent on the game.
• B. The $8 you could have saved toward another goal or the next best use of the money.
• C. The amount of money you have left after the purchase.
• D. The total cost of the game, including any tax.

Answer: (B)

Opportunity cost is the value of the next best use of your money that you give up when you make a choice. Here, you started with $20 and spent $12 on a game, so you’ve used part of your money now. The best other use of the money you didn’t spend is what you could do with the remaining $8—saving toward another goal or using it for something else you value. That $8 represents the next best option you gave up by buying the game, so it’s the opportunity cost. The $12 you spent is the price of the game, not the opportunity cost, and the amount left after the purchase is simply what you still have to spend.