Question

10) If all resources were unlimited and wants were limited:
A) the economy would experience inflation
B) the economy would experience severe unemployment
C) the problem of choice would not exist
D) everyone would have to work much harder

11) Opportunity cost refers to:
A) the cost of equal opportunity programs
B) the monetary cost of seizing good opportunities
C) something that is forfeited
D) the direct costs involved in achieving some objective

12) Opportunity cost is:
A) the highest price that firms are allowed to charge for their products
B) always lower than the price of the item so that the seller can make a profit
C) equal to the profits that firms make
D) the next best alternative that is sacrificed when a choice is made

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 cornC) 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

17) Peter Smith, an unemployed plumber, has just been hired and paid $300 a week for his
services. The opportunity cost, to the economy, of hiring Peter is:
A) his $300 a week wages
B) his contribution to current production
C) the value he assigns to the opportunity to work at his present job
D) zero

18) Constant opportunity cost would occur if:
A) the prices of resources were constant
B) all producers had equal opportunities
C) resources were all equally efficient in all uses
D) all of the above

19) The law of increasing opportunity cost states that:
A) as time passes, the cost of an opportunity increases
B) as opportunities in an economy increase, cost increases
C) as the production of a commodity increases, the cost of the additional production decreases
D) as the production of a commodity increases, the cost of the additional production also rises

20) Increasing opportunity cost occurs because:
A) resources can never be fully employed
B) resources are not all equally efficient in all uses
C) resources are perfect substitutes in different industries
D) none of the above

Answer 1

Q-10

Answer is (c) " The problem of choice would not exist "

Problem of choice arise because of scarcity of resources. Human wants are unlimited but means to them are limited. Hence if resources were unlimited in economy and wants were limited than the problem of choice would never occur.

Q-11

Answer is (c) " Something that is forfeited "

Opportunity cost represents the potential benefits an individual, investor or business misses out on when choosing one alternative over another.

Q-12

Answer is (d) "The next best alternative that is sacrifised when a choice is made"

Opportunity cost represents the potential benefits an individual, investor or business misses out on when choosing one alternative over another. It is the cost of the next best alternative forgone.

Q-13

Answer is (d) " Every act of choosing has an opportunity cost "

Whenever we choose between two alternatives than we always try to choose the best out of them. So the cost of the next best alternative foregone is opportunity cost.

Q-14

Answer is (a) " The additional wheat that can be produced instead"

As the economy decides to produce more corn, this simply means that the economy has to cut the production of wheat to some extent and here the concept of opportunity cost comes in. The opportunity cost of producing more corn is the additional wheat that the economy could have produced instead.

Q-15

Answer is (d) " $5000 "

Opportunity cost = Return on best foregone option - Return on chosen option

= 15000 - 10000 = $5000

Q-16

Answer is (b) " I spend $8000 for tutions last year "

This is not a situation where opportunity cost arise because no other best alternative is given to us.

Q-17

Answer is (a) " His $300 a week wage "

The opportunity cost for hiring peter would be his salary which is $300 a week. This is because with this $300 we could have done something else.

Q-18

Answer is (c) " Resources were equally efficient in all uses "

Opportunity cost is increasing because Resources are not equally efficient in all uses . But if resources are equally efficient in all uses then constatnt opportunity cost would prevail.

Q-19

Answer is (D)

The law of increasing opportunity cost is the concept that as you continue to increase production of one good, the opportunity cost of producing the next unit increases.

Q-20

Answer is (B)

In an economy, resouces are limited and also resources are not equally efficient in all uses. This gives rise to increasing opportunity cost.

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