Question 1

Gina missed her shift at the restaurant in order to attend a soccer game. She paid $30 for the ticket, $20 for parking, and ate $10 worth of popcorn. Had she worked her shift, Gina would have earned $100. Her opportunity cost of attending the game is

Accepted Answer

The opportunity cost is the value of the forgone option. In this case, if Gina had worked her shift, she would have earned $100, but instead, she spent $30 + $20 + $10 = $60 on attending the soccer game. Therefore, her opportunity cost is $100 (income lost from not working) + $60 (expenses incurred from attending the game) = $160. Option C is the correct answer.

Question 2

Because of scarcity, we must give up some of one product in order to get more of another. This is the concept of

Accepted Answer

Opportunity cost refers to the value of the next best alternative that must be given up in order to pursue a certain action or decision. It is a fundamental concept in economics, as it helps individuals and firms make efficient choices about how to allocate scarce resources.

Question 3

Which of the following sayings best describes opportunity cost?

Accepted Answer

The saying "There's no such thing as a free lunch" best describes opportunity cost because it means that everything has a cost, even if it's not monetary, and choosing one option means giving up the opportunity to choose another.

Question 4

Lydia is deciding whether to study for her economics test or her accounting test. If she chooses to study accounting, her opportunity cost is

Accepted Answer

Opportunity cost is the value of the next best alternative foregone. In this case, if Lydia chooses to study accounting, the value or opportunity cost is studying economics since she could have chosen to study economics instead.

Question 5

Markets overcome the problem of scarcity.

Accepted Answer

Markets allocate resources and manage scarcity but do not eliminate the fundamental problem of scarcity itself, which arises because resources are limited while wants are unlimited.

Question 6

Last week Santiago found a new pair of red Nike Air Soles in the parking lot. He had just paid $120 to buy a pair of blue Nike Air Soles a few days earlier. A friend offers $80 to buy the pair of red Air Soles. Santiago says no and decides to keep both pairs for himself. The opportunity cost of this decision is

Accepted Answer

The opportunity cost of Santiago's decision to keep the red Air Soles is the $80 he could have received from his friend for them, which he foregoes by keeping the shoes.

Question 7

Voluntary trade solves the problem of scarcity.

Accepted Answer

Voluntary trade does not solve the problem of scarcity; it allows for a more efficient allocation of scarce resources by enabling individuals to specialize and trade based on comparative advantage, but the fundamental issue of limited resources relative to unlimited wants remains.

Question 8

Charu can earn $200 an hour playing online poker. If she spends an hour in the backyard, she can rake up 2 bags of leaves. Her opportunity cost of playing online poker is measured in units of

Accepted Answer

The opportunity cost of playing online poker for Charu is what she gives up to play poker instead of another activity, in this case, raking leaves. Since she could have raked up 2 bags of leaves in the hour she spent playing poker, her opportunity cost is measured in how many bags of leaves she could have collected per hour, which is "bags per hour."

Question 9

Opportunity cost measures the cost of

Accepted Answer

Opportunity cost measures the value of the next best alternative that must be given up in order to pursue the chosen option. Therefore, the cost is only the best alternative given up.

Question 10

Gina missed her shift at the restaurant in order to attend a soccer game. She paid $30 for the ticket, $20 for parking, and ate $10 worth of popcorn. Had she worked her shift, Gina would have earned $100. Her money cost of attending the game is

Accepted Answer

The money cost of attending the game includes the direct expenses ($30 for the ticket, $20 for parking, and $10 for popcorn) totaling $60. The opportunity cost of not working her shift (foregone earnings of $100) is not a direct monetary cost of attending the game.

Question 11

When the government of New Brunswick chooses to use inputs to build a dam, those inputs are no longer available to build a highway. This illustrates the concept of

Accepted Answer

The scenario presented in the question highlights the concept of opportunity cost, which refers to the trade-off of one option or choice for another. In this case, the government has to choose between using resources to build a dam or a highway, and whichever choice they make, they have to forego the benefits associated with the other option.

Question 12

If we all wanted less, instead of always wanting more, this would solve the problem of scarcity.

Accepted Answer

Scarcity exists because resources are limited and cannot satisfy all human wants, regardless of the level of desire. Reducing wants can alleviate some pressure but does not eliminate the fundamental issue of limited resources.

Question 13

John gave Margaret a $20,000 painting for her birthday. Last week, an art dealer offered to buy the painting from Margaret for $25,000. Margaret said no. The opportunity cost of her decision is

Accepted Answer

The answer of John gave Margaret a $20,000 painting for...

Question 14

Mario divides his time between fishing and farming. In one day he can catch 20 kilograms of fish or harvest 10 bushels of potatoes. Mario's opportunity cost of farming is

Accepted Answer

The opportunity cost of an action is what you have to give up to undertake that action. In this case, for every 10 bushels of potatoes Mario chooses to harvest (instead of fishing), he gives up catching 20 kilograms of fish. Therefore, the opportunity cost of 1 bushel of potatoes is 20 kilograms of fish divided by 10 bushels, which equals 2 kilograms of fish per bushel of potatoes.

Question 15

Scarcity is a problem only for materialistic people.

Accepted Answer

Scarcity is a problem for everyone, regardless of whether they are materialistic or not. Scarcity refers to the limited availability of resources, and everyone must make choices about how to allocate those resources, whether it be time, money, or material goods. Therefore, scarcity affects everyone, not just those who value material possessions.

Question 16

When the government of Manitoba chooses to build more roads, the required inputs are no longer available to build better health care facilities. This illustrates the concept of

Accepted Answer

The concept being illustrated here is opportunity cost. By choosing to allocate resources towards building more roads, the government is giving up the opportunity or potential to allocate those resources towards building better health care facilities. This represents the trade-off that is involved in making any economic decision.

Question 17

The main implication of scarcity in economics is that people must be unhappy.

Accepted Answer

Scarcity means that resources are limited and cannot fulfill all our wants and needs. It does not mean that people must be unhappy, but rather they must make choices and prioritize their preferences. Economics is about studying how people allocate scarce resources to satisfy their unlimited wants and needs.

Question 18

The opportunity cost of attending college

Accepted Answer

The opportunity cost of attending college includes the income you forego by not working full-time while studying, which is what you could earn now.

Question 19

Andrew decides to open a laboratory in his basement. He quits his job, sacrificing $30,000 a year; cashes in $200,000 of Canada Savings Bonds that were paying him an interest rate of 5 percent per year; and evicts a tenant who was paying $10,000 a year in rent to live in the basement. The opportunity cost of Andrew's decision is

Accepted Answer

The opportunity cost is the value of the next best alternative that was sacrificed. In this case, Andrew sacrificed three things: his job, his Canada Savings Bonds, and the rental income he was receiving from his tenant.

The cost of quitting his job is straightforward. He sacrificed $30,000 a year, so that is $30,000 of opportunity cost per year.

In the case of cashing in his Canada Savings Bonds, the opportunity cost is the forgone interest that he would have received if he hadn't cashed them in. The bonds were paying him 5 percent per year, so his annual interest earnings would have been $10,000 (5 percent of $200,000). Therefore, the opportunity cost of cashing them in is $10,000 per year.

Evicting his tenant means that he's no longer receiving the $10,000 in rental income. Therefore, the opportunity cost of this decision is $10,000 per year.

Add up all three opportunity costs and you get $30,000 + $10,000 + $10,000 = $50,000. Therefore, the best choice is B, with an opportunity cost of $50,000.

Question 20

The value of the fork in the road not taken is called

Accepted Answer

The value of the fork in the road not taken is known as opportunity cost. This refers to the benefits that could have been obtained by choosing the next best option. By choosing one option, we forego the potential benefits of choosing the other option. Therefore, it is important to consider opportunity costs when making decisions.

Quiz 1: Whats in Economics for You Scarcity, Opportunity Cost, Trade, and Models