Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is a. the improvement in his grades from studying for the hour. b. the improvement in his grades from studying minus the enjoyment of watching TV. c. the enjoyment he would have received if he had watched TV with his friends. d. zero. Since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV.

The opportunity cost represents individual benefits. Investors and businesses vanished out when choosing one alternative on another. whereas financial cost does not show the opportunity cost. The businessman can use it in making an educated decision when they have several options in front of them. These are unseen opportunity can be overlooked if someone is not careful.

Opportunity is as we can calculate by a formula:

Opportunity cost = FO - CO

FO = Forgone option

CO = Chosen option

This opportunity cost also beneficial in uplifting the cost of the business. Business cost is forward-looking calculation. The actual return of both the option is unknown.