Opportunity Cost
Overview
Every time you choose one thing, you quietly give up something else. A government that builds a new airport terminal cannot spend that same money on hospitals; a student who studies Economics gives up the other subject they could have taken. That hidden cost of the road not taken is one of the most powerful ideas in the whole subject.
In this lesson you will define opportunity cost precisely, see it at work for consumers, workers, firms and governments, and read it straight off a production possibility curve. By the end you will be able to spot the sacrifice behind any economic choice and explain why rational decision makers weigh it carefully.
Objectives
- definition of opportunity cost
- examples of opportunity cost in different contexts
- decisions made by consumers, workers, producers/firms and governments when allocating their resources
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Flashcards
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Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on Opportunity Cost. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Opportunity cost is best defined as: A. the money price paid for a good B. the value of the next best alternative forgone C. the total of all alternatives given up D. the cost of producing a good Answer: B
- A point inside a production possibility curve shows an economy that is: A. using all its resources efficiently B. producing an unattainable combination C. wasting some of its resources D. on its maximum output Answer: C
- A farmer can grow 10 fewer units of corn to gain 5 more units of wheat. The opportunity cost of 1 unit of wheat is: A. 0.5 units of corn B. 2 units of corn C. 5 units of corn D. 15 units of corn Answer: B
- Which good has NO opportunity cost when chosen? A. an economic good B. a scarce resource C. a free good D. a capital good Answer: C
- Moving from inside a PPC to a point on the curve usually involves: A. a large opportunity cost B. producing less of both goods C. no opportunity cost, as idle resources are used D. an unattainable output Answer: C
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