You spend $20 on a lottery ticket instead of buying groceries. The $20 spent on the lottery ticket represents an ________ and the forgone groceries represent an ________.

Question

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The $20 spent on the lottery ticket is an explicit cost because it is a direct, out-of-pocket expense. The forgone groceries represent an implicit cost, which is the value of the next best alternative use of resources (in this case, the groceries you could have bought with the $20).

You Spend $20 on a Lottery Ticket Instead of Buying