Trade Offs and Opportunity Cost

Define opportunity cost:

• When resources are limited, but wants are unlimited.

• Cost of one additional unit.

• The benefit thats given up when you choose one thing over the next best alternative.

• The cost added by producing one additional unit of a product or service.

What is a trade-off?

• Cost that changes (rises or falls) depending on how much is produced.

• Giving up of one thing in return for another; a compromise.

• The additional income from selling one more unit of a good; sometimes equal to price.

• The sum of fixed cost and variable cost.

When you spend $100 on a new pair of shoes, what are some possible trade-offs?

• Two months membership at a gym that costs $50 a month.

• A new pair of jeans and shirt.

• A nice dinner with a friend.

• All of the above

If a person who wants to buy a CD and has just enough money to buy one, and chooses CD A instead of CD B, then CD B is the

• Opportunity Cost

• Trade

True or False: There are trade-offs in every decision you make

• True

• False

Alex is studying for his math quiz, but his favorite TV show just started. If he studies for the quiz, he will miss out on watching the show. Alex decides not to watch the show and continue studying for the quiz. What is the opportunity cost of his decision?

• Studying for a quiz

• watching TV

• Eating dinner

• Taking a nap

Businesses have limited resources with which to pursue their aims

• True

• False

You are having a difficult time deciding if you should spend your money on tickets to see a new movie or going bowling with your friend. You decide to go to the movies, so bowling with your friend would be considered an opportunity cost.

• True

• False

There is a trade-off between quality and price

• True

• False

The opportunity cost of increasing price is decrease in quantity

• True

• False