Section 1.3 Opportunity Cost

Question 1

What is opportunity cost?

Answer 1

The best alternative forgone

Question 2

What is the cause of opportunity cost?

Answer 2

Limited resources cant meet our unlimited wants, therefore we need to make decisions on how to allocate the resources

Question 3

Example of opportunity cost (cost and consumers)

Answer 3

Consumers have to choose what to buy because money is limited. For example, when you buy a book, you cannot buy all the books in the library, therefore you need to choose one by comparing its content and price. The opportunity cost will be not being able to enjoy the other books you did not buy.

Question 4

Example of opportunity cost (cost and worker)

Answer 4

Workers have an option to work in any business where their skills are required. For example, a teacher might also be able to work as a civil servant. The worker needs to consider the wage, job satisfaction, chances of promotion and more when choosing. If they choose to be a teacher, the opportunity cost will be the benefits of working as a civil servant

Question 5

Example of opportunity cost (cost and producers)

Answer 5

Producers have to decide what to make. For example, If a farmer uses a field to grow beet instead of keeping cattle, the opportunity cost will be not profiting from the milk and meat the cattle make.

Question 6

Example of opportunity cost (cost and government)

Answer 6

The government had to decide what to spend its tax revenue on. If they choose to spend it on education instead of building a hospital, the opportunity cost will be losing the benefits of a hospital.

Question 7

Is there an opportunity cost for making economic goods and free goods?

Answer 7

There is an opportunity cost when making economic goods as resources are needed to make it. However, no resources are needed to produce free goods, therefore there is no opportunity cost.