G8 Econs - Opportunity Cost and Decision Making

A student chose to attend a tuition-free university for five years in a field that might not lead to a job. What was a major opportunity cost of this decision?

• The cost of textbooks and supplies.

• The money he could have earned and professional experience gained by working for five years.

• The tuition fees he would have paid at a private university.

• The social life he missed out on during his studies.

A freelancer decided to renovate his flat himself, which took two weeks. He could have earned $3,000 from a web development job during that time. What was the opportunity cost of his decision?

• The $1,000 he saved by not hiring a renovation team.

• The cost of the paint and tools he bought.

• The $3,000 he could have earned from the web development job.

• The time he spent working on his flat.

A baker left his job earning $36,000 a year to start his own business, which earned him $24,000 in the first year. What was the opportunity cost of starting his own business?

• The $24,000 he earned from his new business.

• The $12,000 difference he could have earned by staying at his old job.

• The cost of ingredients for his bakery.

• The satisfaction of being his own boss.

A man bought fireworks for $1,000 and sold them a year later for $1,030. He could have put the $1,000 in a savings account earning 5% interest. What was the opportunity cost of buying the fireworks?

• The $30 profit he made from selling fireworks.

• The $50 he could have earned from the savings account.

• The storage space used for the fireworks.

• The time spent selling the fireworks.

What is the term for the value of the next best alternative that is given up when a choice is made?

• Production cost

• Sunk cost

• Opportunity cost

• Fixed cost

Why is opportunity cost considered a subjective idea?

• Because it is always measured in money.

• Because only the individual making the choice can estimate the value of the best alternative they gave up.

• Because it only applies to large businesses.

• Because it is a fixed value for everyone.

Why does every decision a person makes involve a cost?

• Because people always choose the most expensive option.

• Because resources are unlimited, leading to difficult choices.

• Because people cannot do two different things at the same time with limited resources.

• Because all choices lead to financial loss.

What is "psychic profit"?

• Money earned from a psychic reading.

• Non-monetary subjective gains from an action.

• The financial loss experienced by a business.

• The total income a person receives from their job.

Besides making money, what else can motivate people to act?

• Only the desire for more material possessions.

• Personal happiness, aesthetic sensation, or religious fulfillment.

• The need to impress their bosses.

• Avoiding any form of work or effort.

Why did the student choose a field of study that might not lead to a high-paying job?

• He was forced to by his parents.

• He wanted to prove a point to his teachers.

• His great passion for the field outweighed the lack of monetary gain.

• He believed he would eventually become very rich from it.