What concept refers to the benefits lost by choosing one alternative over another?

The concept that refers to the benefits lost by choosing one alternative over another is known as opportunity cost. Opportunity cost represents the potential value or benefit that is foregone when one decision is made over another. In other words, it is the cost of the next best alternative that is not taken when a choice is made.

When evaluating different options, understanding opportunity cost helps individuals and organizations to consider not just the direct costs associated with a decision, but also what they are potentially sacrificing in terms of benefits or value by not choosing the alternative. This concept is crucial in decision-making processes across various fields, including finance, economics, and project management, as it emphasizes the importance of considering all possible outcomes when making choices.

In contrast, direct costs are expenses that can be directly attributed to a specific project or cost object, while fixed costs are expenses that do not change regardless of the level of goods or services produced (such as rent or salaries). Indirect costs refer to expenses that are not directly tied to a specific project and are instead spread over multiple projects or activities. These concepts do not encapsulate the idea of lost potential benefits in the decision-making process, which is why opportunity cost is the most relevant choice.