Opportunity cost

A farmer decides to grow potatoes instead of wheat. What is the opportunity cost of growing the potatoes?

• the output of wheat

• the price of seed potatoes

• the profit from growing potatoes

• the time spent preparing the potato field

A deposit of shale oil is discovered in an area of farming. The following estimates are made for a ten-year period.

● If the land is used only for farming it would yield income after tax of $10 billion.

● If the land is used only for shale oil extraction it would yield income after tax of $40 billion.

● The government would receive $5 billion in taxes from farming and $10 billion in taxes from shale oil extraction. What is the opportunity cost of using the land only for farming?

• $25 billion

• $30 billion

• $35 billion

• $45 billion

Which statement explains why the pay of doctors is usually higher than the pay of hospital cleaners?

• Doctors have a higher opportunity cost in qualifying

• Doctors have a more elastic supply than hospital cleaners.

• Hospital cleaners belong to trade unions with stronger bargaining powers

• Hospital cleaners have a more inelastic demand than doctors

A student decides to buy a ticket for a concert instead of buying a new shirt. What is the opportunity cost of buying the ticket?

• the concert

• the price of the ticket to the concert

• the shirt

• the time spent purchasing the ticket

In recent years more golf courses, which use large quantities of water, have opened in China. What is the opportunity cost of this?

• cost of water

• loss of farmland

• sales of golf equipment

• wages of golf course staff

A farmer reduces the land used to grow wheat from 80 hectares to 60 hectares and increases the use of the land for growing potatoes from 80 to 100 hectares. What is the opportunity cost of this change?

• The output from 20 hectares used for growing potatoes.

• The output from 20 hectares used for growing wheat.

• The output from 60 hectares used for growing wheat.

• The output from 80 hectares used for growing potatoes.

The Norwegian government chose to spend the profits from oil on stocks, bonds and property. The possibility of improving domestic infrastructure, therefore, was not taken. Which economic concept does this best illustrate?

• cost of production

• finite resources

• opportunity cost

• production possibility frontier

In economics, natural sunlight is classified as a free good. What is the reason for this?

• Sunlight is a gift of nature

• Sunlight is a renewable resource

• There is no opportunity cost of using sunlight

• Unlimited amounts of sunlight can be consumed.

A government allowed a building company to construct new houses which destroyed an area designated as an area of natural beauty. Which concepts can be applied to this statement?

• budget surplus; public sector

• external cost; opportunity cost

• government subsidy; mixed economy

• private enterprise; budget deficit

A government decides to spend more on defence and cannot spend money on a new airport. Which concepts can be applied to the above statement?

• A budget surplus; external cost

• factor of production; private monopoly

• public sector; opportunity cost

• trade surplus; budget deficit