What is opportunity cost?

ASU economics expert explains the key differences between opportunity and sunk costs, two concepts that heavily shape decision-making.

In this story published Mar. 11, 2025, on The Motley Fool:

Opportunity costs and sunk costs are two distinct concepts. For example, the opportunity cost of employment is the value of leisure time, including cooking at home, that one sacrifices by accepting a job. In contrast, sunk costs refer to expenses or efforts incurred by an entrepreneur to start a business that cannot be recovered if the entrepreneur decides to close the business. Therefore, the opportunity cost of employment is not considered a sunk cost, as one can regain the value of leisure and cooking by quitting the job.

– Domenico Ferraro, associate professor of economics