F3 - SEM1 - Opportunity Cost - 1B Flashcards
What we have to do when there are scarcity?
1B Opportunitiy Cost
make choices
1B Opportunitiy Cost
What is opportunity cost?
1B Opportunitiy Cost
the highest value forgone
1B Opportunitiy Cost
What is the opportunity cost when there is no other options available?
1B Opportunitiy Cost
zero
because nothing is given up when making a choice
1B Opportunitiy Cost
Under what condition, the opportunity cost will be changed?
1B Opportunitiy Cost
Only when the highest-valued option forgone changes
1B Opportunitiy Cost
Case study
John has 2 options to spend an afternoon: go to a concert or go to a karaoke lounge.
How John’s opportunity cost of going to the karaoke lounge would change and why if the concert was very boring?
1B Opportunitiy Cost
opportunity cost of going to the karaoke lounge would decrease
because the highest-valued option forgone descrease
1B Opportunitiy Cost
Case study
John has 2 options to spend an afternoon: go to a concert or go to a karaoke lounge.
How John’s opportunity cost of going to the karaoke lounge would change and why if the service of the karaoke lounge was very poor?
1B Opportunitiy Cost
opportunity cost of going to the karaoke lounge would remain unchanged
because the highest-valued option forgone remains unchanged
1B Opportunitiy Cost
Case Study
May is considering accepting one of the following job offers: (1) a clerk in an import-export firm, (2) a salesgirl in a department store. Which of the following changes will NOT affect her opportunity cost of choosing to work as a clerk?
A. The import-export firm increases its staff’s welfare
B. The department store offers a higher salary
C. There is a third offer paying a higher salary than the original 2 offiers
D. The department store announces that their business will terminate one year later
1B Opportunitiy Cost
A
A - no changes in the highest valued forgone
B - opportunity cost increase
C - opportunity cost increase
D - opportunity cost decrease
1B Opportunitiy Cost
Case Study
Mr Wong could spend 2 hours at a free-of-charge concert or tutoring a student at $60 per hour. He could use the time on painting and earn a total of $150. What is the opportunity cost of his choice of going to the concert?
1B Opportunitiy Cost
$150
tutoring a student at $60 per hour x 2 hour = $120
painting - $150
highest-valued forgone, $150
1B Opportunitiy Cost
What would happen when the opportunity cost of a behavior increase?
Give an example.
1B Opportunitiy Cost
the number of behavior will be decreased
When the government increase the penalty of littering, fever people wlll litter
1B Opportunitiy Cost
Case Study
A shipping mall has recently launched a promotion campaign. For every purchase of $100, customers are given a stamp. Customers can exchange the stamps for the following gifts
20 stamps -> 1 set of stationery
40 stamps -> 1 tea pot
60 stamps -> 1 $50 coupon
Mrs. Lam has used 60 stamps in exchange of a $50 coupon. What is her opportunity cost of doing so?
A. $6000
B. 60 stamps
C. 1 set of stationery and 1 tea pot
D. 1 set of stationery, 1 tea pot and 60 stamps
1B Opportunitiy Cost
C
1B Opportunitiy Cost
Case Stufy
John lives in his own apartment which is worth $1 million. He can sell the apartment and put the money in a bank at an interest rate of 5% per year. He can also rent out the apartment at $5000 a month. What is the opportunity cost to John if he decides to live in the apartment?
A. $1 million
B. $50,000 a year
C. $5000 a month
D. There is no opportunity cost because he lives in his own apartment
1B Opportunitiy Cost
C
Interest per year = $1 million x 5% = $50,000
rent per year = $5000 x 12 = $60,000
highest-value forgone is $60,000
1B Opportunitiy Cost
Case Study
A German tourist is choosing between a tour to Ocean Park and Hong Kong Disneyland. Which of the following will lead to an increase in his cost of choosing to visit Hong Kong Disneyland?
A. The price of hotel accommodation in Hong Kong decreases
B. Ocean Park introduces a new thrill ride
C. The services provided at Hong Kong Disneyland are better than expected
D. Hong Kong Disneyland builds a zoo within it
1B Opportunitiy Cost
B
1B Opportunitiy Cost
Case Study
During a summer holiday, Ada planned to work in a fast food restaurant and gave up the choice to study English in England. Which of the following may increase her opportunity cost to work in the fast food restaurant?
A. The wage of the fast food restaurant was reduced
B. She hurt her waist carelessly while at work in the fast food restaurant and had to stay in the hospital for treatment
C. The English learning institude is a scam
D. The organiser of the English course invited a lecturer whom Ada likes
1B Opportunitiy Cost
D
1B Opportunitiy Cost
