Opportunity costs refer to the value of the next best alternative that is forgone when making a choice. It represents the benefits or profits that could have been gained from an alternative option.
Imagine you have $20 and you can either buy a new video game or go to a movie with your friends. If you choose to buy the video game, your opportunity cost would be the fun and experience you could have had at the movie.
Trade-offs: Trade-offs are choices made between different options due to limited resources. For example, choosing to study for an exam instead of going out with friends is a trade-off.
Sunk Costs: Sunk costs are expenses that have already been incurred and cannot be recovered. They should not be considered when making future decisions.
Comparative Advantage: Comparative advantage refers to the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost compared to others.
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