Question 1

A university student is faced with a difficult decision of how to spend 1 hour tonight.She could babysit her professor's child at an hourly wage of $7;she could work at the university library at a wage of $6;or she could finish her economics homework assignment.If she chooses to complete her homework assignment,she has incurred an opportunity cost equal to:
A) $7.
B) $6.
C) $13.
D) $0.

Accepted Answer

The opportunity cost of completing her homework is the value of the next best alternative she forgoes, which is babysitting for $7.

Question 2

While buying refreshments for an upcoming party,you notice that a six-pack of Canadian Beer costs $2 and a six-pack of Bavarian Beer costs $4.You buy the six-pack of Bavarian Beer,although you wonder if maybe two six-packs of Canadian Beer would have been a better choice.The opportunity cost of the Bavarian Beer is:
A) $4.
B) the six-pack of Canadian Beer.
C) two six-packs of Canadian Beer.
D) $4 and the six-pack of Canadian Beer.

Accepted Answer

The opportunity cost of choosing the Bavarian Beer is what you give up, which is two six-packs of Canadian Beer that you could have bought for the same $4.

Question 3

For a student who owns his or her own home and doesn't plan to live on campus,the cost of going to university is:
A) tuition and the cost of housing.
B) tuition,the cost of housing,and the cost of books and other school materials.
C) tuition,the cost of books and other school materials,and forgone income.
D) forgone income only.

Accepted Answer

The cost of going to university for a student who owns their home and doesn't plan to live on campus includes tuition, the cost of books and other school materials, and forgone income, as they are not paying for additional housing.

Question 4

Zoe's grandparents are excited about finally paying off their mortgage because,as they say,"Our cost of housing is now zero." Zoe should explain to them the economic concept of:
A) marginal analysis: if the additional cost of housing is zero,then their additional benefit is also zero.
B) opportunity cost: by living in the house,they are giving up the opportunity to sell the house,buy a smaller one,and pocket the difference.
C) efficiency: If their cost of housing is now zero,they should let Zoe move in without charging her any rent.Zoe is better off,and her grandparents aren't hurt.
D) equity: it is unfair that some people are still paying off their mortgage.

Accepted Answer

The grandparents are only looking at the fact that they no longer have to make monthly mortgage payments, but they are overlooking the opportunity cost of living in the house. By not selling the house and downsizing, they are giving up the opportunity to make a profit from the sale and use that money in other ways.

Question 5

Whenever a choice is made:
A) the cost of that choice is the opportunity cost.
B) the cost is easy to measure in dollar terms.
C) efficiency is improved.
D) scarcity is not a problem.

Accepted Answer

The cost of a choice is always the opportunity cost, which is the value of the next best alternative that is forgone as a result of choosing one option over another. This concept takes into account the fact that resources are scarce and must be allocated efficiently in order to maximize benefits. The opportunity cost may not always be easily measurable in dollar terms or lead to improved efficiency, but it is always present and relevant in decision making.

Question 6

A friend comes up to you and offers you a free ticket to a Toronto Blue Jays game that night.You decide to attend the game.The game takes 5 hours and costs you $15 for transportation.If you had not attended the game,you would have worked at your part-time job for $8 an hour.What would be the cost to you of attending the game?
A) The cost is zero-the ticket is free.
B) $65
C) $40
D) $55

Accepted Answer

Attending the game costs $15 for transportation and 5 hours of not working. Therefore, the cost of attending the game would be: 
$15 + (5 hours x $8/hour) = $55. 
Choice D is the correct answer.

Question 7

You have $1 to spend on a vending machine snack.A bag of chips will cost you $1 and a candy bar will also cost you $1.If you choose the bag of chips,the opportunity cost of buying the chips would be:
A) $1 plus the enjoyment you would have received from the candy bar.
B) $2 minus the enjoyment you would have received from the bag of chips.
C) $1.
D) the enjoyment you would have received from the candy bar.

Accepted Answer

The opportunity cost is the value of the next best alternative foregone, which in this case is the enjoyment from the candy bar.

Question 8

Your elderly grandma tells you: "I haven't been taking my beloved walks because I'm concerned about falling and getting hurt.See,there is always a cost to doing something.But if you don't do anything,then there is no cost." Your grandma does not understand the economic concept of:
A) scarcity.
B) efficiency.
C) opportunity cost.
D) marginal analysis.

Accepted Answer

The concept of opportunity cost states that there is a cost to every decision made because the next best alternative option is forgone. In this case, the opportunity cost of not taking walks is potentially missing out on the benefits of regular exercise and fresh air, which could have a negative impact on her overall health and well-being.

Question 9

For an economist,the cost of something is:
A) the amount of money you paid for it.
B) what you gave up to get it.
C) always equal to its market value.
D) the quantity of resources used to produce it.

Accepted Answer

For an economist, the cost of something is not limited to the financial value paid for it. It includes what you gave up to obtain it, such as the opportunity cost of choosing that option over an alternative.

Question 10

The opportunity cost of something is:
A) larger during periods of rising prices.
B) equal to the monetary cost.
C) smaller during periods of falling prices.
D) what is given up to acquire it.

Accepted Answer

The opportunity cost of something is defined as what is given up to acquire it. It is not necessarily equal to the monetary cost, and it is not affected by changes in prices. Therefore, the correct answer is D.

Question 11

You can spend $100 on either a new economics textbook or a new tablet computer.If you choose to buy the new economics textbook,the opportunity cost is:
A) $100.
B) your enjoyment of the new tablet computer.
C) both the $100 and your enjoyment of the new tablet computer.
D) impossible to determine.

Accepted Answer

The opportunity cost of choosing the economics textbook is the value of the alternative forgone, which in this case is your enjoyment of the new tablet computer. Therefore, the best choice depends on your personal preferences and needs. If you value education and learning more than having a new tablet computer, then the economics textbook would be the best choice. However, if you value technology and entertainment more, then the tablet computer would be the better choice.

Question 12

The Taco Hut charges the same price for everything on its menu: $3 will buy a taco,a burrito,or nachos.You buy the taco and think that if you had not purchased the taco,you would have purchased the burrito.The opportunity cost of the taco is:
A) $3.
B) your enjoyment of the burrito.
C) $3 and your enjoyment of the burrito.
D) $3,your enjoyment of the burrito,and your enjoyment of the nachos.

Accepted Answer

The opportunity cost is what you give up in order to make a choice. In this case, if you had not purchased the taco, you would have purchased the burrito instead. Therefore, the opportunity cost of the taco is the enjoyment you would have received from the burrito. Since the price of both items is the same, the $3 you spent on the taco is not considered part of the opportunity cost.

Question 13

Margo spends $30 000 on 1 year's university tuition.The opportunity cost of spending 1 year in university for Margo is:
A) $30 000.
B) whatever she would have purchased with the $30 000 instead.
C) whatever she would have earned had she not been in university.
D) whatever she would have purchased with the $30 000 plus whatever she would have earned had she not been in university.

Accepted Answer

The opportunity cost includes both the tuition cost and the income she foregoes by attending university instead of working.

Question 14

Opportunity cost is:
A) about half of the monetary cost of a product.
B) the dollar payment for a product.
C) the benefit derived from a product.
D) the value of the best alternative forgone in making any choice.

Accepted Answer

Opportunity cost is the value of the best alternative forgone in making any choice. Therefore, option D is the best choice.

Question 15

Khalil is offered a free ticket to the opera which he cannot resell.His opportunity cost of going to the opera is:
A) zero-the tickets were free.
B) the price listed on the ticket.
C) whatever Khalil would have done had he not gone to the opera.
D) the price listed on the ticket and whatever Khalil would have done had he not gone to the opera.

Accepted Answer

Khalil's opportunity cost is the value of his next best alternative, which in this case is whatever he would have done had he not gone to the opera. Since he cannot resell the ticket, the price listed on the ticket is irrelevant. Therefore, the correct answer is C.

Question 16

A new startup airline is offering a free round-trip ticket to Hawaii to the first 600 people who enter the airline's main office on the airline's first day of business.You arrive 24 hours before it is scheduled to open to be sure to get the free ticket,and you buy food from vendors while waiting in line.You successfully obtain the ticket.What would be the cost to you for obtaining the ticket?
A) zero
B) the cost of food while you wait in line
C) the cost of food while you wait in line and the opportunity cost of your time spent in line
D) the actual value of the ticket

Accepted Answer

While the ticket itself is free, there is an opportunity cost associated with waiting in line for 24 hours. This means that you are giving up the opportunity to do something else with your time that could have potentially earned you money or provided other benefits. Additionally, you had to purchase food from vendors while waiting in line, which is an out-of-pocket cost. Therefore, the total cost of obtaining the ticket would be the cost of food while waiting in line, as well as the opportunity cost of your time spent in line.

Question 17

The university recently inherited a large mansion from a wealthy alumnus.The university plans to use the mansion for faculty parties and to house distinguished guests.The opportunity cost of the mansion to the university is:
A) zero because it was a gift.
B) the original cost of building the mansion.
C) the amount the university would receive if it sold the mansion.
D) the cost of catering the parties at the mansion.

Accepted Answer

The opportunity cost of the mansion is the next best alternative that the university would have forgone if it had not inherited the mansion. In this case, that would be the amount the university would receive if they sold the mansion. Even though the mansion was a gift, the university still has the option to sell it and use the funds for other purposes. Therefore, the opportunity cost is not zero. The original cost of building the mansion is not relevant in determining the opportunity cost, nor is the cost of catering the parties.

Question 18

If the provincial government allocates additional spending on education programmes,the opportunity cost is:
A) zero.
B) the dollar amount of the additional spending.
C) considered only if taxes have to be raised to fund the spending.
D) measured in terms of the best alternative uses for that money.

Accepted Answer

Opportunity cost is measured in terms of the best alternative uses for that money. When the government allocates additional spending on education programs, it means they have chosen to allocate resources to education instead of other possible alternatives, such as healthcare, infrastructure, or tax cuts. Therefore, the opportunity cost is the value of the best alternative foregone, which could be measured in terms of the benefits or returns expected from that alternative use of the resources.

Question 19

The BEST measure of the opportunity cost of any choice is:
A) the monetary cost of that choice.
B) whatever you have given up to make that choice,even if no monetary costs are involved.
C) the cost associated with not taking full advantage of the opportunity offered by that choice.
D) your hourly wage.

Accepted Answer

Opportunity cost takes into consideration what is being given up in order to make a choice, even if it doesn't involve monetary costs. Therefore, option B is the best measure of opportunity cost.

Question 20

A new fast-food restaurant offered a prize-a free meal (valued at $5)each week for a year-to its first 100 customers.Ramona camped out for 48 hours before the opening to be one of the first 100 customers,and she successfully obtained the prize.The cost to Ramona of obtaining the "free meal a week for a year" prize was:
A) zero.
B) $260.
C) whatever else she would have done with the 48 hours.
D) The cost is impossible to determine.

Accepted Answer

The cost to Ramona is the opportunity cost of whatever else she could have done with her time (48 hours) instead of camping out for the prize. This is an example of an opportunity cost, which is the value of the next best alternative foregone as the result of making a decision.

Quiz 1: First Principles

For a student who owns his or her own home and doesn't plan to live on campus,the cost of going to university is:

Zoe's grandparents are excited about finally paying off their mortgage because,as they say,"Our cost of housing is now zero." Zoe should explain to them the economic concept of:

Whenever a choice is made:

You have $1 to spend on a vending machine snack.A bag of chips will cost you $1 and a candy bar will also cost you $1.If you choose the bag of chips,the opportunity cost of buying the chips would be:

Your elderly grandma tells you: "I haven't been taking my beloved walks because I'm concerned about falling and getting hurt.See,there is always a cost to doing something.But if you don't do anything,then there is no cost." Your grandma does not understand the economic concept of:

For an economist,the cost of something is:

The opportunity cost of something is:

You can spend $100 on either a new economics textbook or a new tablet computer.If you choose to buy the new economics textbook,the opportunity cost is:

The Taco Hut charges the same price for everything on its menu: $3 will buy a taco,a burrito,or nachos.You buy the taco and think that if you had not purchased the taco,you would have purchased the burrito.The opportunity cost of the taco is:

Margo spends $30 000 on 1 year's university tuition.The opportunity cost of spending 1 year in university for Margo is:

Opportunity cost is:

Khalil is offered a free ticket to the opera which he cannot resell.His opportunity cost of going to the opera is:

The university recently inherited a large mansion from a wealthy alumnus.The university plans to use the mansion for faculty parties and to house distinguished guests.The opportunity cost of the mansion to the university is:

If the provincial government allocates additional spending on education programmes,the opportunity cost is:

The BEST measure of the opportunity cost of any choice is: