Opportunity Cost

Question 1

Opportunity cost is best defined as:

Accepted Answer

The next best alternative given up — Opportunity cost is the single next best alternative forgone when a choice is made.

Question 2

Opportunity cost arises directly because of:

Accepted Answer

Scarcity and choice — Scarcity forces choices, and every choice involves an opportunity cost.

Question 3

A student spends an evening studying instead of watching a film or meeting friends. The opportunity cost is:

Accepted Answer

Whichever was the next best option — Opportunity cost is only the single next best alternative given up.

Question 4

Which group faces opportunity cost?

Accepted Answer

Consumers, producers and governments — All decision makers face opportunity cost because all face scarcity.

Question 5

A farmer uses a field to grow wheat instead of the more profitable barley. The opportunity cost is the:

Accepted Answer

Barley given up — The best sacrificed alternative, the barley, is the opportunity cost.

Question 6

A government builds a road rather than a hospital. The opportunity cost is the:

Accepted Answer

Hospital not built — The hospital is the next best use of the funds that was forgone.

Question 7

A decision is worthwhile when the benefit gained is:

Accepted Answer

Greater than the opportunity cost — A choice pays off only if its benefit exceeds the opportunity cost.

Question 8

Which statement about opportunity cost is correct?

Accepted Answer

It is the next best alternative forgone — Opportunity cost is the next best alternative given up, not the money price.

Question 9

A consumer with limited income buys a jacket instead of shoes. The opportunity cost is the:

Accepted Answer

Shoes given up — The shoes are the next best alternative that was sacrificed.

Question 10

Ignoring opportunity cost may lead to:

Accepted Answer

Resources being used less valuably — Overlooking opportunity cost can waste resources on lower-value uses.