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Define: opportunity cost Answer The benefit foregone of the best alternative - which is sacrificed when making a decision. 12 0 obj 6 0 obj Opportunity Cost Questions and Answers - Discover the eNotes.com community of teachers, mentors and students just like you that can answer any question you might have on Opportunity Cost b. Opportunity cost can be assessed directly with cost effectiveness or cost utility studies. 2 2. Lesson summary: Scarcity, choice, and opportunity costs. a) The frontier reflects constant costs of production. Geoff Riley FRSA has been teaching Economics for over thirty years. Cost incurred due to shortage of stock is known as _____ a. Imputed cost b. B)opportunity cost. Although the concept of opportunity cost is fundamental, … (1 mark) The opportunity cost of increasing the output of consumer goods from 60m to 90m consumer goods. 2 0 obj point C to B? Let us now do the same Opportunity Cost example in Excel. This is very simple. ��/��_�I��m� @� @� (R`ss�w��?�'�t�◊,�� @� @� @`�b��o?�ǟ{��d�k� @� @� P��s�=��5��s/Y&y @� @� @��D��S��?ے��~�Ԁ @� @� ��y�7>��$�\d�ț @� @� ��'~�c��N��X�ʩ @� @� &P�?~�ٖ�쳿[X�dL� @� @� ��}��t��JQ9� @� @� @� ��"��?�э��ǟ/�@2&@� @� @� �RD��_��\:=��[��J @� @� @�@a~�W?��ӟI�'��ta�1 @� @� �B �Ϗ?��ǟ��t.E۪ @� @� ��c��_�T:}�ɏY&y @� @� @��|�#�{�ßx�_}2�>��7F�iՀ @� @� � c) analyzing the trade-off between unemployment and inflation. >> C)accounting cost. 5 Question 4 6 Question 5 Answer Application 2 Application: Calculation of original opportunity cost of producing 50 capital goods is 120 -100=20 consumer goods. If there were an official slogan for the concept of opportunity cost, it would be, “There is no such thing as a free lunch.” The usual meaning of the slogan is that there are strings attached Between what two points is the opportunity cost per unit the least in terms of giving up arms for food? With the aid … The opportunity cost of producing 80m capital goods. Get help with your Opportunity cost homework. Opportunity Cost Assume that you would engage in all of the following activities. She takes a full load of classes and has ... opportunity cost of computers is lower in Germany and the opportunity cost of grain is lower in Poland. Opportunity cost measures the cost of any choice in terms of the next best alternative foregone. Practice question with answers. The opportunity cost represents the value of the next best alternative. Number of Jeeps (1000’s) Number of Cars (1000’s) E. 40 60 D)an opportunity cost 40) 41)The term used to emphasize that making choices in the face of scarcity involves a cost is A)utility cost. If we are operating at point E, what is the opportunity cost of moving to point D? endstream Opportunity cost c. Imputed cost d. Notional cost 42. When two or more interventions are compared cost utility effectiveness analysis makes the opportunity cost of the alternative uses of resources explicit. Opportunity Cost Calculation in Excel. The relevant cost of any decision is its opportunity cost - the value of the next-best alternative that is given up. �T�IJW�+�/T� ߞ��뙝��t=u7;/� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @� @�@y~�i)O�Ԅ @� @� ��Ǟ��G?J�x��ȓ @� @� �#��u.O� @� @� D)an opportunity cost 40) 41)The term used to emphasize that making choices in the face of scarcity involves a cost is A)utility cost. Opportunity Cost Past Paper Answers Questions 2 Question 1 3 Question 2 4 Question 3. Cost incurred due to shortage of stock is known as _____ a. Imputed cost b. Cost effectiveness ratios, that is the £/outcome of different interventions, enable opportunity costs of each intervention to be compared. Clyde Prestowitz, in his assigned reading, cites a study that measures various costs of US trade with China. The resources could be used in the following ways. A)the question "what." O�[��9ϋ��3��{��$��M3�?�[��'�hz�~S�Rj��ۀ��&�� '� ��n��ʾ�e��>�ƥ�OǸ,��hV��n��W�G!�`��2�Oz#Z��N}�+#�RYt�q�bw�� a��v��'�^5��e�j�!�+��LY!Zh��f�mq&�L��L�ǜ��6n k�?=M��L?X LK��(c�� )�r@�uU�r�1b��=��gG�Q�ڇ��^2��q�w��m�$�K��yF̰\�?�M�^jeK��wȡ��m��V�ʗ�p>��G��?��\x��Ȋ��rz~d;f�>��Ǥյ�}��#CZ�u>��Z�r��k�Ԓ�W�5�!� Practice Questions to accompany Mankiw & Taylor: Economics 1 Chapter 3 1. opportunity cost (i.e. a. D. 375 125 c) It shows the relative prices of two outputs that can be produced with available resources. C)accounting cost. Define: interest rate The return for saving or the cost of borrowing. The basic economic questions. Opportunity cost is best assessed directly with cost-effectiveness or cost utility analysis using comprehensive, disaggregated data at the individual patient level (Palmer and Raftery, 1999). Copyright © 2020 StudeerSnel B.V., Keizersgracht 424, 1016 GC Amsterdam, KVK: 56829787, BTW: NL852321363B01, Answers Credit, banks and money + Economic fluctuations and unemployment. B. Opportunity cost is the benefits lost from taking a decision. a) It shows the maximum combinations of two outputs that can be produced with available resources. Explain your answer to question 21 - why is the opportunity cost greater for one set of points over the other. << /ProcSet [ /PDF /Text /ImageB /ImageC /ImageI ] /ColorSpace << /Cs1 7 0 R Chapter 3 - Demand and Supply - Sample Questions Answers are at the end fo this file MULTIPLE CHOICE. contrived, opportunity cost questions’. to produce Jeeps or passenger cars. The opportunity cost of producing 80m capital goods. opportunity cost (i.e. C. 20 130 Where is the opportunity cost greater when giving up cars for tanks - moving from point B to C or from E to A PPF would be most useful in: stream During World War II, auto production was cut drastically. Angela is a college student. Four factors of production. a) determining the price of scarce resources. D)substitution cost. Where is the opportunity cost greater when giving up tanks for cars - moving from Point E to D or from The potential return of the second best project that was not selected. 2 3. b) The opportunity cost of moving from Point B to Point D is 5 million units of food. Manufacturers would like to produce. B)opportunity cost. Exercises 1.2. Test your understanding of Opportunity cost concepts with Study.com's quick multiple choice quizzes. They are duplicates of the questions found in the Topic sub-sections. Opportunity Cost. How they are answered depends largely on the type of economic system the country has. 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Define: decision-making d) At Point D, all resources are allocated to food production. b. The opportunity cost of good A in terms of good B is equal to the A)ratio of the price of good B to the price of good A. At what point would you produce during peacetime auto production. 1. Opportunity cost is equal to implicit costs plus explicit costs. 125 375 2017/2018 Opportunity cost only measures direct monetary costs. 0 150 State the numbers. �kB�$� �̷;۔�.4��M�9��Tf4�p��%��wj�j�k�>d#�h��Gu&��-��*Qa��e�dh�MY5 e�L��}k�#��˷��ϯWt�;�d��t��Wu]��tkƏ^\+z�'�T�}YU\l��4�;Ѯ�a�E��Eulk�V Access the answers to hundreds of Opportunity cost questions that are explained in a way that's easy for you to understand. NB: Answer only three (3) questions in this section QUESTION 1 (a) Define the following terms: (i) Production possibilities curve (ii) Opportunity cost (5 marks) (b) Assume there are only two (2) kinds of goods; “consumer goods” and “capital goods”. Z��_h�hQ��n�=.�b�(D{�yg��2��q,|]PG�'|�� C�4� �>��R�,{��{�*^�]PEK�A�UE�&�؍�jWn�i��C�,ޣ��k�Qƚ��>��N�ྂ&�� K˧��I!�'ؒgQ�EAoh��VH��3SF 8��2bS��L�(��Jo�a�dK��ý� 1277 0 500 >> /ExtGState << /Gs1 14 0 R >> /Font << /TT2 9 0 R /TT4 11 0 R >> /XObject d) The PPF is based on the premise of scarcity. Dayne Lee. Which statements about the Production Possibilities Frontier are true? That's a real opportunity cost, but it's hard to quantify with a dollar figure, so it doesn't fit cleanly into the opportunity cost equation. The manufacturing opportunity curve shows different combinations of output: consumers like to consume. First, undergraduate teaching is failing to deliver good understandings of opportunity cost. The opportunity cost of increasing the output of consumer goods from 60m to 90m consumer goods. endobj Which statements about the Production Possibilities Frontier are true? endobj Same example, but now we have to make tanks instead of jeeps. a) curve b) asymptote c) straight line d) spiral. Course. b) It shows the minimum combinations of two outputs that can be produced with available resources. b) evaluating the constraints that apply to land-use decisions. 4 0 obj d) It shows the equitable mix of products that can be produced with available resources. The authors’ discussion may be summed up as follows. Opportunity cost can lead to optimal decision making when factors such as price, time, effort, and utility are considered. Which of the following statements about the PPF is true? (3) (b) Which one of the following is the most likely effect of an economy producing more capital goods? Abilities vs Abilities The opportunity cost of after school violin lessons at a particular school is the ability to join other after school activities such as baseball or the chess club. A B c D Reduced specialisation of labour Study Questions (with Answers) Page 5 of 7 (9) 11. �PsĞ�w��+�T� @� @� @�@I666^}��?�0��.I� @� @� ��P�~��N�.�Sq%�3 @� @� �A ��w��J��_~�uS @� @� (N ��_y��J$g @� @� (��ۿ��t�ҫe��: @� @� @�@q��w��w��ŕH� @� @� P��}��[��t��׿W�� @� @� '��ׯ��7��J$g @� @� (��K��~�/��N_��w�P7u @� @� @� ��"��ҟ��W��$�\\�ș @� @� ��~�җ^��t��˥��J @� @� @�@aI��O��/�e�)D��ɘ @� @� J!p��o��Z�WJQ9� @� @� @� ��.^|��R:mn~��ɘ @� @� J!��W��,�^x�RTN% @� @� @�0��?��r:}��H� @� @� P Opportunity cost is one of the key concepts in the study of economics Economics CFI's Economics Articles are designed as self-study guides to learn economics at your own pace. Swinburne University of Technology. 4dQ��$nS'�X��mu-Qd"vt��[��J�ht�3Qr��|�ܛ��j�� j��>H$� A. 80 60 50 ... Multiple-choice questions Before answering a set of multiple-choice questions, check over your work on the topics Finally, choose your next best option in order to determine the opportunity cost for you for each activity. 1.2 Give It Up for Opportunity Cost! At what point on the graph is the economy producing the greatest amount of output possible? Why could you not increase the production of cars without decreasing the production of jeeps? a. Sunk cost b. Google Classroom Facebook Twitter. What is the opportunity cost of producing one more jeep? B)money C)giving up something for nothing. d) analyzing the trade-off between resources allocated to the automobile and resources allocated to, Which of the following is not represented by the PPF? Scarcity. Economists use the term . That is, each has a … Academic year. Email. c) The opportunity cost of moving from Point D to Point B is 5 million units of food. << /Type /Page /Parent 3 0 R /Resources 6 0 R /Contents 4 0 R /MediaBox [0 0 595.2755 841.8898] Introduction to economics. D. 30 100 %PDF-1.3 Opportunity cost is the cost of taking one decision over another. a) The frontier reflects constant costs of production. Second, graduate education is likewise deficient because it does not revisit the concept and reinforce its relevance to real world decisionmaking. F? The opportunity cost concept has been advocated as the prime decision cost concept by economists and accountants, notably scholars of the London School since Nineteen Thirties. A. Number of Tanks (1000’s) Number of Cars (1000’s) Microeconomics Topic 1: “Explain the concept of opportunity cost and explain why accounting profits and economic profits are not the same.” Reference: Gregory Mankiw’s Principles of Microeconomics, 2nd edition, Chapter 1 (p. 3-6) and Chapter 13 (p. 270-2). What is the Opportunity Cost of a Decision? 1. 5 0 obj x�X�n�6}�WL֎�Jm��H�jR��㺉{�@�F�4��n��JK]�]�E��C��̡n��С��k��2=�Zj��V��dO�o�g��N�]ޑ, �U�^?��/��5A_�QtMֻ��ɮֲ��a��ک"��wq��Z9hUޔFvZ��V�)ǉ��&zMR��Ѯ��PmH�_x��h��u�qyM'��.��5��$��w�� Cost effectiveness ratios, that is the £/outcome of different interventions, enable Opportunity costs are truly everywhere, and they occur with every decision we make, whether it’s big or small. a) trade-offs b) scarcity c) price levels d) increasing opportunity costs, In the case of a constant trade-off, the resulting PPF would resemble? %�� Opportunity Cost Define and describe opportunity cost. Work-leisure choices: The opportunity cost of deciding not to work an extra ten hours a week is the lost wages foregone. The biggest opportunity cost regarding liquidity has to do with the chance that you could miss out on a prime investment opportunity in the future because you can't get your hands on your money that's tied up in another investment. The income lost by workers who become unemployed c. Food stamps d. Lost tax receipts e. This is easy to see while looking at the graph, but opportunity cost can also be calculated simply by dividing the cost of what is given up by what is gained. University. He has over twenty years experience as Head of Economics at leading schools. of a smart choice must outweigh the opportunity cost. {!��'��N'~n�LuT @� @� �_��w��N�ܚğ�o 9 @� @� @�\I��o�i=��|�j�6 @� @� ��s��#@� @� @��XX;w��;v��d��h|�$@� @� @�@��7��/�o�7�,�� @� @� ��@=��7ܛN��U� @� @� � What is the opportunity cost of producing 125 more cars? When two or more interventions are compared cost utility effectiveness analysis makes the opportunity cost of the alternative uses of resources explicit. D)substitution cost. Mock Questions on Opportunity Cost. An introduction to the concepts of scarcity, choice, and opportunity cost. If an owned building is used for a business project, the likely rent of the building receivable if let out is an example of _____ a. Sunk cost b. Imputed cost c. Opportunity cost d. Notional cost 43. stream F. 50 0. State the numbers. /FlateDecode >> II. The opportunity cost represents the value of the next best alternative. Which of the following is not one of those costs? Cost effectiveness ratios, that is the £/outcome of different interventions, enable Let’s take a look at a couple of sample questions on the topic of Opportunity Cost below: Sample Question 1: “Which definition best fits Opportunity Cost?” The sum of all of the potential returns of projects not selected. D��oK�ŵ�g�� @� @� @�@�ğ��G� @� @�@6��&f�*�o�f�eXkğ�?uϿ. Choose the one alternative that best completes the statement or answers the question. The production possibilities curve (PPC) is a model used in economics to illustrate tradeoffs, scarcity, opportunity costs, efficiency, inefficiency, and economic growth. Missed a question here and there? a) The frontier reflects constant costs of production. C. 250 250 endobj The opportunity cost of the new product design is increased cost and inability to compete on price. Scarcity and rivalry. In the process of making this choice they have to give up other alternative so the concept of opportunity cost is applicable for each and every level of economic agents. This cost is not only financial, but also in time, effort, and utility. At what point would you produce during 1942? endobj Example #4 – Paying Off Debt Versus Spending on Welfare by Government The resources available could be used This question does precisely that! Between what two points is the opportunity cost per unit the greatest in terms of giving up arms for food? Which statements about the Production Possibilities Frontier are true? Opportunity cost c. Imputed cost d. Notional cost 42. 10 145 A)the question "what." Opportunity Cost . It’s necessary to consider two or more potential options and the benefits of each. So the opportunity cost of buying an SUV includes an alternative option, such as buying a less expensive sedan. The cost of opportunity is the worst of the various alternatives to be abandoned when the choice is made in the face of scarcity. Which of the following statements about opportunity cost is TRUE? Then consider what else you could be doing with your time or money if you decided not to engage in those activities. • Cost-benefit analysis is one of the main ways that economists analyse major development proposals and environmental problems • Similar to Net Present Value technique commonly applied in finance • Works by identifying all the costs and benefits that would result from a particular resource use • These include non-money costs and benefits According to the theory of competitive advantage, specialization and free trade will benefit all trading parties, even those that may be absolutely more efficient producers. choosing to purchase 2 CDs instead a book because we have a limited amount of money to spend). Best project that was not selected fo this file multiple choice, production! Different combinations of two outputs that can be assessed directly with cost effectiveness or cost utility effectiveness makes! 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Imputed cost b be to... ) ( b ) the PPF is true … what is the opportunity cost concepts with Study.com 's multiple. Which is sacrificed when making a decision end fo this file multiple choice quizzes potential options the! Best completes the statement or Answers the question. the Questions found in the sub-sections... Over the other ( you may use the last column in answering the.!, that is the opportunity cost - the value of the following about! Decided not to work an extra ten hours a week is the opportunity cost greater for one of! What is the economy producing the greatest amount of money to spend ) to have less of else. Answered depends largely on the topics opportunity cost can be produced with available resources capital?. Use the last column in answering the question. c. Imputed cost d. cost! 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