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Which concept refers to the loss of potential gain from other alternatives when one alternative is chosen?

Return on investment

Opportunity cost

The concept referring to the loss of potential gain from other alternatives when one alternative is chosen is known as opportunity cost. Opportunity cost highlights the value of the next best alternative that is foregone when making a decision. For instance, if an individual decides to spend time studying for an exam instead of working part-time, the opportunity cost is the income they would have earned during that work time.

Understanding opportunity cost is crucial for effective decision-making, as it emphasizes the trade-offs inherent in any choice. By evaluating what is sacrificed in pursuing a particular option, individuals and businesses can better assess the relative benefits of different paths they can take. This concept is pivotal in economics and personal finance, assisting in making informed decisions that optimize resources and outcomes.

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Cost-benefit analysis

Emotional pricing

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