Question

13) Which of the following statements is correct?
A) Opportunity cost is always expressed in monetary terms
B) For any economy, opportunity cost is always constant
C) Opportunity cost is always positive
D) Every act of choosing involves an opportunity cost
14) If an economy decides to produce extra corn instead of more wheat, the opportunity cost of
the extra corn is:
A) the additional wheat that it could have produced instead
B) the market value of the corn

C) the cost of the resources used to produce the corn
D) the wages paid to corn growers
15) All expenses (tuition fees, transportation, books, room and board, etc.) incurred in attending
college amount to $10 000 annually. Instead of attending college, you could have taken a job
which pays $15 000 a year. Your total cost of attending college is:
A) $10 000 a year
B) $15 000 a year
C) $25 000 a year
D) $5 000 a year
16) Which of the following does not explicitly state the principle of opportunity cost?
A) If I attend college full-time, I must give up some earned income
B) I spent $8000 for tuition last year
C) If a fully employed economy wants to produce more of some goods, it must produce less of
other goods
D) If I spend more time watching TV, I will have less time to devote to my courses

Answer 1

13. D) Every act of choosing involves an opportunity cost. This is the CORRECT choice.

Whenever an option is chosen from several alternatives, something is given up. Choices involve trading off the benefits of one opportunity against the benefits of its best alternative. The opportunity cost of deciding for an option is the value of the best alternative being given up.

14. A) the additional wheat that it could have produced instead. This is the CORRECT choice

Economy has two choices to select from - 1) produce extra corn 2) produce more wheat. When a decision is made to produce extra corn, economy is giving up the choice of producing additional wheat.

15. C) $25 000 a year. This is the CORRECT choice

Cost of attending college is $10,000 per annum. The alternative is to take up a job that pays $15,000 a year. When the decision is made to attend the college, the choice of taking up a job is given up which means a potential alternative to earn $15,000 per annum instead. The opportunity cost is the sum of college expenses plus the money you could have earned if you had chosen to take up the job. Thus total cost of attending the college is ($10,000 + $15,000) $25,000.

16. B) I spent $8000 for tuition last year. This is the CORRECT choice

The opportunity cost of deciding for an option is the value of the best alternative being given up. It is not evident in B) what was given up in lieu of the tuition fee. Options A), C) and D) have stated the alternative being given up when a decision is made for one.