Opportunity Cost Test

A government is faced with the choice of spending on either education or healthcare.

Of what is this an example?

• conservation of resources

• monetary policy

• opportunity cost

• substitution of factors

The diagram shows the choices for an individual between leisure and earnings.

What is the opportunity cost to the individual of the extra earnings when moving from position X

to position Y?

• $20

• $80

• 4 hours of leisure per day

• 8 hours of leisure per day

Sam wrote a list of how he would prefer to spend his Saturday afternoon.

first choice go to a cricket match

second choice watch the annual town parade

third choice go to the cinema

fourth choice visit relatives

Unfortunately a thunderstorm caused the cricket match and the town parade to be cancelled.

Sam went to the cinema.

What was the opportunity cost of going to the cinema?

• going to the cricket match

• watching the town parade

• visiting his relatives

• losing his Saturday free time

A power plant is built to provide electricity to a rural area in Botswana.

What is the opportunity cost to the local economy of building the plant?

• the cost of the building materials

• the price of electricity

• the school which was not built as a result

• the wages of the power plant workers

What could be the opportunity cost of a nuclear power station?

• the running costs of the power station

• a coal-fired power station

• the current value of the power station

• the cost of building the power station

The government of a country with a rapidly increasing population decides to switch resources from investment to increased subsidies to farmers.

What is the opportunity cost of this decision?

• the profit earned by farmers

• he rent of the land on which food is grown

• the reduction in investment

• the wages of the farm workers

A firm decides to stop manufacturing ovens and to produce washing machines instead.

What is the opportunity cost to the firm?

• the additional washing machines produced

• the cost of producing ovens

• the cost of producing washing machines

• the loss of the production of ovens

A student leaves school and decides to spend the next two years at a college to improve her qualifications.

What is the opportunity cost to the student of taking this decision?

• the cost of the course fees at the college

• the increase in job opportunities she will have as a result of her extra qualifications

• the lost production due to her not being in work

• the money she would have earned if she had been in work for the two years

A person makes sandwiches at home for five hours each day. She makes 20 sandwiches per hour, and she sells each sandwich for $2 each.

What is the opportunity cost if she takes a holiday on a working day?

• $2

• $40

• 20 sandwiches

• 100 sandwiches

The diagram shows the choices for an individual between leisure and earnings.

What is the opportunity cost to the individual of the extra earnings when moving from position X to position Y?

• $10

• $40

• 3 hours of leisure per day

• 9 hours of leisure per day