Could you please provide a specific example to illustrate an opportunity cost that should be considered in decision making?

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Imagine you are a student at a university. You have a summer job in construction that pays $15 per hour. Your boss gets a contract on a big highrise that will last through most of the next year. You also have a scholarship for next year at school. You need to choose between the option of taking the job and continuing in school.

If you choose the job: the opportunity cost (stuff you lose) is the scholarship and progress to your degree, which may result in a better job in the long run. You may also have a set back in your studies (you may forget first year Spanish or calculus).

If you choose school: the opportunity cost is the income you might have gotten from the job, the experience in the construction industry, and good chances at future jobs with that company.

In other words, opportunity costs are all about trade-offs. Doing A has the opportunity cost of not doing B.

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