Understanding Opportunity Cost

In economics, opportunity cost is best defined as:

• The monetary cost of a decision

• The foregone benefits of all decisions

• The value of the next best alternative foregone

• The total cost of all alternatives considered

Which of the following is an example of opportunity cost?

• The wages earned from a part-time job

• The cost of materials used in production

• The time spent studying instead of working

• The price paid for a product

The concept of opportunity cost is based on the principle of:

• Scarcity

• Efficiency

• Utility

• Demand

When a country decides to invest more in education rather than infrastructure, the opportunity cost is:

• The value of the additional education received

• The value of the infrastructure not built

• The monetary cost of the decision

• The value of the resources used in education

Which of the following factors affects opportunity cost the least?

• The price of a product

• The availability of resources

• The preferences and goals of individuals

• The level of exports of the country

Opportunity cost can be illustrated graphically by:

• The production possibilities curve

• The demand curve for a good or service

• The cost curve for a product

• The supply curve for a good or service

The opportunity cost of producing a good increases when:

• The price of the other good increases

• The demand for the good increases

• The resources used in production become more abundant

• There are new technological developments

Which of the following statements about opportunity cost is TRUE?

• Opportunity cost is always equal to the market price of a good

• Opportunity cost is the same for all individuals

• Opportunity cost can be subjective and vary among individuals

• Opportunity cost is only applicable to financial decisions

When making a decision, it is important to consider opportunity cost because:

• It helps minimize costs and maximize profits

• It ensures equitable distribution of resources

• It reflects the true value of resources used

• It reveals the trade-offs involved in decision-making

The opportunity cost of an action is highest when:

• The action has no immediate benefits

• The action requires a significant financial investment

• The action has long-term consequences

• The action involves giving up a highly valued alternative