vertical axis), in this case $0.50/$2 = 0.25. If you want to determine the opportunity cost quickly, just divide the

two prices.

Identifying Opportunity Cost

In many cases, it is reasonable to refer to the opportunity cost as the price. If your cousin buys a new bicycle for

$300, then $300 measures the amount of “other consumption” that he has forsaken. For practical purposes,

there may be no special need to identify the specific alternative product or products that he could have bought

with that $300, but sometimes the price as measured in dollars may not accurately capture the true

opportunity cost. This problem can loom especially large when costs of time are involved.

For example, consider a boss who decides that all employees will attend a two-day retreat to “build team

spirit.” The out-of-pocket monetary cost of the event may involve hiring an outside consulting firm to run the
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