Wendy stayed home from work for a year after her son was born, forfeiting the salary she earned as a loan officer for a bank. When she decided to go back to work, her position was filled and she had to find another one. The position she landed was at a slightly lower level, and the pay was somewhat less. Economists would talk about these as:

Question

Quizplus · Accepted Answer

Wendy's decision to stay home and forfeit her salary is an example of an opportunity cost, which refers to the cost of forgoing the next best alternative. In this case, the next best alternative was for Wendy to continue working and earning a salary as a loan officer. Her decision resulted in the loss of that salary, as well as possibly missing out on career advancement opportunities. The fact that her new position has a lower level and pay is a consequence of the opportunity cost of her decision.

Wendy Stayed Home from Work for a Year After Her