U1.1 Opportunity Cost

Which of the following is not included in the study

of economics?

• Scarce resources

• Choice

• What people should buy

• Opportunity cost

According to the meaning of opportunity cost, what

is sacrificed when a decision is taken?

• An identical alternative

• Any alternative

• The least valuable alternative

• The next best alternative

A new dam is built in Turkey to provide hydroelectric

power and a water supply. What is the opportunity

cost to the economy of building the dam?

• The cost to households and businesses of

  consuming the water supply

• The benefits foregone from other uses of the money used to pay for the dam

• The cost to consumers of using hydroelectric

  power

• The money used to pay for the construction and

  running of the dam

A firm can produce a number of possible

combinations of two goods. It can either produce

500 of good x and 300 of goody, or 600 x and 250 y.

What is the opportunity cost of producing an extra

100 of good x?

• 100 y

• 250 y

• 50 y

• The extra wages paid to the workers

Answer explanation

X: 600-500=100

Y: 300-250=50

In the study of economics, resources are also

known as:

• Workers and machines

• Raw materials

• Factors of production

• Profits

Production can be defined as:

• Any activity that turns raw materials into

  finished goods

• Any activity that makes and sells goods

  and services

• Any activity that is designed to satisfy wants

• Any activity that makes a profit

An entrepreneur is someone who:

• Owns a factory

• Takes the risks and decisions necessary to

  organize resources to produce goods and services

• Is a supervisor in charge of workers

• Is a producer

The basic economic problem faced by all

economies is:

• Rising prices

• Unemployment

• Scarcity of resources

• Low economic growth

A social club has sold raffle tickets at US$10 each.

The owner of the winning ticket received a prize of

US$250. A student bought a ticket, but did not win.

What is the opportunity cost to the student?

• US$10

• US$250

• What could have been bought with the US$10

• What could have been bought with the US$250

Which statement best explains why drought is an

economic problem?

• Rainfall cannot be predicted easily

• The effects of drought require government action

• Droughts cannot be prevented

• Water is a scarce good