Question 1

Stephanie has only one hour to study for an exam in math or to complete an assignment in economics. For Stephanie, the opportunity cost of spending the hour completing the economics assignment is

Accepted Answer

The opportunity cost of choosing one option over another is what is foregone by not choosing the second option. In this case, if Stephanie chooses to complete the economics assignment, she foregoes the opportunity to study for the math exam, potentially leading to a lower grade in math.

Question 2

Exhibit 1-2 
-According to Exhibit 1-2, if Sam did all the cooking as well as waited on tables, how many customers would he be able to serve per day?

Accepted Answer

The answer of Exhibit 1-2 
-According to Exhibit 1-2, if...

Question 3

An example of opportunity cost is the

Accepted Answer

Opportunity cost refers to the value of the best alternative that is forgone. In this scenario, the opportunity cost of choosing to eat Italian food is the Chinese food that was given up. The other options listed do not demonstrate a clear choice between different alternatives and therefore do not involve an opportunity cost.

Question 4

Exhibit 1-1
 
-Refer to Exhibit 1-1. Suppose that Adam has three hours to study for an exam in economics and another exam in sociology on the same day. The amount of time he spends studying economics and its relation to his grade in the two classes are shown in the table. The opportunity cost of increasing the time spent on studying economics from two hour to three hours is

Accepted Answer

The opportunity cost of increasing the time spent on studying economics from two hour to three hours is the loss of points in the sociology grade. From the table, we can see that if Adam spends 2 hours on studying economics and 1 hour on sociology, he will get 80 points on the economics exam and 85 points on the sociology exam. If he spends 3 hours on economics, he will get 90 points on the economics exam but only 45 points on the sociology exam. Therefore, the opportunity cost of increasing the time spent on studying economics from 2 hours to 3 hours is the difference in the sociology grade, which is 40 points (85-45).

Question 5

The opportunity cost of an activity is the total value of all activities that a person cannot do.

Accepted Answer

The opportunity cost of an activity is the value of the next best alternative that is foregone as a result of making a decision to pursue that activity.

Question 6

Gains from trade occur when there are differences in opportunity cost.

Accepted Answer

Gains from trade occur because different individuals, firms or countries have different opportunity costs in producing a particular good or service. By specializing in producing the goods or services they have a comparative advantage in, and trading with others who have a comparative advantage in producing other goods or services, all parties can benefit and achieve a higher level of total output and consumption than they would have otherwise.

Question 7

The opportunity cost for a student to attend college is zero if the student receives a scholarship.

Accepted Answer

While a scholarship may cover the direct costs of attending college, there are still opportunity costs such as time spent studying instead of working, participating in extracurricular activities instead of pursuing a job or other opportunities, and potentially missing out on experiences outside of college.

Question 8

Which of the following statements is false?

Accepted Answer

Every person, regardless of their financial situation, faces opportunity costs when making choices because all resources are scarce. Option C is incorrect because it assumes that a person without a budget constraint does not have to make choices and does not face opportunity costs.

Question 9

When the economy is in recession, jobs are generally harder to find and more people go to college. We can conclude that the opportunity cost of

Accepted Answer

The opportunity cost of going to college decreases during a recession because the alternative, working, is less attractive due to fewer job opportunities. This makes the cost of missing out on employment to attend college lower.

Question 10

According to the textbook, the main reason for Mark Zuckerberg to leave college and to start a new company, Facebook, is that

Accepted Answer

According to the textbook, Zuckerberg believed that the opportunity cost of staying in college was higher than that of running Facebook. He saw a great opportunity to create a social network that could connect people around the world and believed that pursuing this opportunity could offer greater rewards than staying in college. Therefore, he left college to start Facebook.

Question 11

Aaron's budget is such that he can afford either a large-screen high-definition TV or a trip to Disney for his whole family, both of which cost the same. Which of the following statements about Aaron's opportunity cost is correct?

Accepted Answer

The answer of Aaron's budget is such that he can...

Question 12

The opportunity cost of attending college

Accepted Answer

Opportunity cost is the value of the next best alternative that must be given up in order to pursue a certain action. In the case of attending college, the opportunity cost is the lost incomes that would have been earned if the student had not attended college. This is because the student would have had the option to enter the workforce immediately and earn an income. While attending college may lead to higher future earnings, there is still an opportunity cost in the form of the lost current income.

Question 13

Gains from voluntary trade arise because

Accepted Answer

Gains from voluntary trade arise because it reallocates goods between individuals in a way they both prefer. Both parties engage in the trade because they believe that they will be better off after the trade than they were before it. This results in both parties benefiting, which leads to mutual gains from the trade.

Question 14

A voluntary exchange of existing consumer goods is beneficial because it

Accepted Answer

A voluntary exchange of existing consumer goods allows individuals to trade goods they value less for goods they value more, resulting in both parties being better off. It does not change the total quantity of goods produced, but rather reallocates existing goods. While it may reduce scarcity for the individuals involved in the exchange, it does not necessarily reduce scarcity overall. Choice is required for individuals to determine which goods they wish to exchange.

Question 15

A college student faces no opportunity cost if her parents pay her college tuition and her living expenses.

Accepted Answer

A college student still faces opportunity cost even if her parents pay her college tuition and living expenses. For example, she may have to forgo a job or internship opportunity to focus on her studies, or she may have to give up other leisure activities to meet academic demands. Opportunity cost is the value of the next best alternative that must be given up in order to pursue a certain choice or action.

Question 16

Trade benefits people only when they together produce more goods or services.

Accepted Answer

Trade can benefit people through the allocation of resources according to comparative advantage, allowing for specialization and efficiency gains, even if the total production of goods or services does not increase.

Question 17

Maria has two options to spend her school break in the summer: get a summer job that pays $3,000 or travel in Mexico. The opportunity cost of the summer job is that Maria

Accepted Answer

The opportunity cost of taking the summer job is giving up the opportunity to travel in Mexico. Therefore, the best choice for Maria would depend on her personal priorities and preferences. If she values experiencing new cultures and traveling more than earning money, traveling in Mexico would be the better choice for her. However, if she needs the money or values work experience more, taking the summer job would be the better choice.

Question 18

The opportunity cost of a choice is the

Accepted Answer

The opportunity cost of a choice is the value of the next best alternative that is not chosen, representing what is foregone by making a particular choice.

Question 19

In economics, choices are made based on

Accepted Answer

Choices are made based on opportunity costs, which means the cost of choosing one option is the foregone benefit from not choosing the next best alternative. Therefore, individuals weigh the benefits and costs of each option before making a choice, and choose the option that provides the most net benefit, i.e., the most benefit minus the opportunity cost.

Question 20

Of the following individuals, who bears the highest opportunity cost of going to college?

Accepted Answer

The opportunity cost is the value of the best alternative that must be foregone in order to pursue a certain action or decision. In this case, the pro-football player earning $2 million a year has the highest opportunity cost of going to college because they would need to give up potentially millions of dollars in earnings while attending college.

Quiz 1: The Central Idea