Opportunity Cost 2

Construction companies are building new houses on land previously used for farming.

What is the opportunity cost to society of this activity?

• improved living conditions

• less congestion in city centres

• more homes for new homeowners

• some farm output

A government is faced with the choice of raising taxation or cutting public spending.

Of what is this an example?

• conservation of resources

• monetary policy

• opportunity cost

• substitution of factors

The table shows the various combinations of food and clothing which a village can produce using all its resources.

What is the opportunity cost to the village of increasing the production of food from 200 to 300

units?

• 50 units of clothing

• 100 units of clothing

• 200 units of clothing

• 250 units of clothing

Commercial companies are cutting down tropical rainforests for hardwood timber.

What is the opportunity cost to society of this activity?

• tax revenue from the sale of the timber

• the environment that is destroyed

• the products made from the timber

• the profits of the companies

Which of the following is an opportunity cost of using farmland for grazing animals?

• the cost of animal feed

• the price animals can be sold for

• the use of the land to grow crops

• the cost of preparing the land for grazing

A country raises the school leaving age from 15 to 17 years.

What is the opportunity cost of this increased period of school education to the young people affected?

• costs of training and employing more teachers

• financial help necessary for school leavers who go to university

• government expenditure on building extra classrooms

• lost income from paid employment because of school attendance

Which of the following is an example of opportunity cost applied to consumers?

• the cost of an item bought regularly

• the ability to buy more when prices are lower

• the decision to buy a book instead of a toy

• the cost of a present to buy for a friend

Why must a government consider the opportunity cost of spending decisions

• to get the best value for money

• because the money comes from taxation

• because a choice is made between alternative uses

• to meet all the people's needs