Opportunity Cost Calculation Methods

This video tutorial explains a fail-safe method for calculating opportunity cost using three steps: calculating differences, writing sentences, and dividing to find unit costs. It covers examples using production possibility frontiers (PPF) and alternative data formats, ensuring learners can apply the method in various scenarios.

What are the three steps in the fail-safe method for calculating Opportunity Cost?

• Identify the Cost, Calculate the Benefit, Compare

• Calculate the Difference, Write the Sentence, Divide

• Determine the Output, Measure the Input, Analyze

• List the Resources, Allocate the Resources, Evaluate

In the context of a PPF, what does 'Calculate the Difference' involve?

• Comparing the cost of different resources

• Identifying the most efficient production point

• Calculating the difference between production points

• Finding the total production

What is the purpose of writing a sentence in the Opportunity Cost calculation method?

• To express the opportunity cost in terms of given values

• To identify the most profitable option

• To list all possible production combinations

• To summarize the entire process

How do you find the opportunity cost per unit in the Divide step?

• By subtracting the values in the sentence

• By adding the values in the sentence

• By multiplying the values in the sentence

• By dividing the values in the sentence

What is the opportunity cost of 1 TV if moving from point A to B results in gaining 10 TVs and losing 5 chairs?

• 5 chairs

• 2 chairs

• 1/2 a chair

• 10 chairs

If the opportunity cost of 5 chairs is 10 TVs, what is the opportunity cost of 1 chair?

• 2 TVs

• 1/2 a TV

• 5 TVs

• 10 TVs

What should you do if your teacher requires a different method for calculating Opportunity Cost?

• Ignore the teacher's method

• Use the fail-safe method as a backup

• Only use the teacher's method

• Combine both methods

When given production per hour, what step can be skipped in the Opportunity Cost calculation?

• None of the steps can be skipped

• Divide

• Write the Sentence

• Calculate the Difference

If Jill can produce 5 chairs or 3 TVs per hour, what is the opportunity cost of 1 chair?

• 1 TV

• 5/3 of a TV

• 3/5 of a TV

• 2 TVs

For Tom, if the opportunity cost of 10 chairs is 2 TVs, what is the opportunity cost of 1 chair?

• 1 TV

• 5 TVs

• 2 TVs

• 1/5 of a TV