Question

Part III: Scarcity, Cost-Benefit, and Opportunity Cost

1) List the THREE questions society must ask itself because of scarcity. (1.5 pts)

1.
2.
3.

2) What are the potential costs and benefits of deciding to go to a 4-year university after graduation? (2 pts)

Costs:

Benefits:

3) Give a situation where you’ve had to use a cost-benefit analysis to make a decision. What were the costs and benefits? (3 pts)

Situation:

Costs:

Benefits:

4) Tyler received $100 for his birthday. He chooses to buy five new video games instead of saving it for gas for a trip to Chicago he wants to take. What is the opportunity cost in this scenario? (2 pts)

5) Using the graph below, answer the following questions. (1.5 pts)

If the entrepreneur decides to make 18 goods, he can only provide ________ services.

If the entrepreneur decides to now make 22 goods, he can only provide _______ services, which makes his opportunity cost ________________________.

Answer 1

1. Three questions the society must ask itself because of scarcity are:

What to produce?

How to produce?

For whom to produce?

2. Costs: the salary from the job you might have taken after high school, any fun, experience or pleasure that you miss out for going to university.

Benefits: degree, better career opportunities.

3. Situation: Pursuing a two year MBA degree or taking up the job after graduation. Decided to skip MBA and go for job.

Costs: the degree, better opportunities for career, all the fun and experience that I missed.

Benefits: salary from taking up the job. The job experience.

4. When Tyler choose to buy five new video games he gave up going to Chicago. The opportunity cost for five new video games is the fun and pleasure he would have gotten after going to Chicago with that money.

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