An entrepreneur chooses to allocate time to building a skill instead of earning wages. The opportunity cost is:

• A. The wage income foregone.
• B. The depreciation of equipment.
• C. The interest on saved funds.
• D. The value of the next best alternative skill learned.

Answer: (A)

Opportunity cost is the value of the next best thing you give up when you make a choice. In this scenario, the entrepreneur could earn wages by working instead of spending that time to build a skill. By choosing to work on the skill, the immediate thing forgone is the wage income that would have been earned in that time. That forgone wage represents the opportunity cost of the decision.

Why the other ideas don’t fit: depreciation of equipment is a cost tied to using capital, not the value you give up by choosing how to spend your time. The interest on saved funds is the opportunity cost of saving money rather than spending it, which isn’t the direct trade-off in this time-versus-work choice. The value of the next best alternative skill learned describes the potential benefit you forego or the gain you might receive, not the cost you incur by not working.