Question 1

Suppose after graduating from college you get a job working at a bank earning $30,000 per year.After two years of working at the bank earning the same salary,you have an opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank.Which of the following should not be included in a calculation of your opportunity cost?

Accepted Answer

The opportunity cost is the value of the next best alternative forgone. In this case, it would be the $30,000 salary that could have been earned if the job at the bank was retained, and any benefits that would have come with it (such as employee benefits). Additionally, the cost to attend the graduate program, such as tuition and books, should also be included in the calculation. However, the $45,000 salary that will be earned after completing the graduate program is not an opportunity cost, as it is not forgone by choosing to attend the program. Rather, it is a potential benefit of attending the program.

Question 2

In economics,the cost of something is

Accepted Answer

According to the concept of opportunity cost in economics, the cost of something is what you give up to get it. It includes both the monetary cost as well as the alternative options that are forgone in order to obtain that particular item or service. Therefore, option C is the most appropriate answer.

Question 3

You have driven 1,000 miles on a vacation and then you notice that you are only 50 miles from an attraction you hadn't known about,but would really like to see.In computing the opportunity cost of visiting this attraction you had not planned to visit,you should include

Accepted Answer

The opportunity cost of visiting the attraction includes only the additional cost incurred by driving the extra 50 miles, as the cost of the first 1,000 miles is a sunk cost and should not be considered.

Question 4

When calculating the cost of college,which of the following should you probably not include?

Accepted Answer

The answer of When calculating the cost of college,which of...

Question 5

When you calculate your true costs of going to college,what portion of your room-and-board expenses should be included?

Accepted Answer

When calculating the true costs of going to college, you should only include the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college. This is because these expenses are not solely related to attending college and would be incurred regardless of whether or not you are a college student. By excluding these base expenses, you can get a more accurate estimate of the true cost of attending college.

Question 6

Samantha's college raises the cost of room and board per semester.This increase raises Samantha's opportunity cost of attending college

Accepted Answer

The opportunity cost of attending college is the value of the next best alternative that must be given up to attend college. If the cost of attending college increases, but the cost of not attending college stays the same, then the opportunity cost of attending college has increased. This means that Samantha has to give up more in order to attend college, which reduces her incentive to do so. However, if the cost of not attending college increases by the same amount or more than the cost of attending college, then the opportunity cost of attending college has not increased as much or may have even decreased. In this case, Samantha's incentive to attend college may not be affected or may even increase. Therefore, the correct answer is C, only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges.

Question 7

For a college student who wishes to calculate the true costs of going to college,the costs of room and board

Accepted Answer

Room and board should only be counted to the extent that they are more expensive at college than elsewhere. This is because the true cost of college is not just the cost of tuition and fees, but also the opportunity cost of not working or investing that money elsewhere. If a student can live and eat cheaper off-campus, then that should be factored into their overall cost calculation.

Question 8

When computing the opportunity cost of attending a concert you should include

Accepted Answer

The opportunity cost of attending a concert includes both the price of the ticket as well as the value of your time. By choosing to attend the concert, you are giving up the opportunity to do something else with that time (such as working or pursuing another leisure activity). Therefore, it is important to factor in both the financial cost of the concert and the value of the time you are sacrificing.

Question 9

Mallory decides to spend three hours working overtime rather than watching a video with her friends.She earns $8 an hour.Her opportunity cost of working is

Accepted Answer

Opportunity cost is the value of the next best alternative foregone. In this case, it is the enjoyment Mallory would have received from watching the video, not the money she earns from working.

Question 10

Moira decides to spend two hours taking a nap rather than attending her classes.Her opportunity cost of napping is

Accepted Answer

Opportunity cost is the value of the next best alternative that must be forgone in order to pursue a certain action. In this case, Moira's next best alternative was attending her classes and gaining knowledge, which has a value. Therefore, her opportunity cost of napping is the value of the knowledge she would have received had she attended class. B is not the correct answer because it is not relevant to Moira's decision to nap instead of going to class. C and D are also incorrect because they do not accurately represent the concept of opportunity cost.

Question 11

Russell spends an hour studying instead of playing tennis.The opportunity cost to him of studying is

Accepted Answer

Opportunity cost is the value of the next best alternative foregone. In this case, Russell's next best alternative to studying was playing tennis. By choosing to study, he gave up the enjoyment and exercise he would have received from playing tennis. Therefore, the opportunity cost of studying is C) the enjoyment and exercise he would have received had he played tennis.

Question 12

When calculating the cost of college,which of the following should you probably include?

Accepted Answer

The answer of When calculating the cost of college,which of...

Question 13

What you give up to obtain an item is called your

Accepted Answer

Opportunity cost is the cost of the next best alternative that must be forgone in order to pursue a certain action. This is the most appropriate term to describe what is given up in order to obtain an item. Explicit cost refers to the actual expenses incurred, true cost is not a commonly used term, and direct cost refers to costs that are directly related to the production of a good or service.

Question 14

The opportunity cost of going to college is

Accepted Answer

Opportunity cost refers to the value of the next best alternative that a person must give up in order to undertake a certain action, in this case, going to college. Therefore, the opportunity cost of going to college is the value of the best opportunity that one gives up, such as pursuing a career straight out of high school, starting a business, or taking care of family responsibilities.

Question 15

Which of the following is correct concerning opportunity cost?

Accepted Answer

Opportunity cost refers to the value of the best alternative forgone. When making a decision, only those costs that are over and above the cost of what you would have purchased anyway should be considered as an opportunity cost. For example, if you are offered a job that pays $10,000 more than your current job but requires you to move to a new city and pay an extra $5,000 in living expenses, the opportunity cost would be $5,000 (the additional expenses) and not $15,000 (the additional expenses and income). Therefore, option A is correct.

Question 16

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

Accepted Answer

The cost of the parking permit is a direct cost that is incurred as a result of attending college, and it would not have been incurred if the individual was not attending college. Therefore, it is part of the opportunity cost of attending college.

Question 17

For which of the following individuals would the opportunity cost of going to college be highest?

Accepted Answer

The answer of For which of the following individuals would...

Question 18

Pete receives $50 as a birthday gift.In deciding how to spend the money,he narrows his options down to four choices: Option A,Option B,Option C,and Option D.Each option costs $50.Finally he decides on Option B.The opportunity cost of this decision is

Accepted Answer

The opportunity cost of choosing Option B is the value of the next best alternative, which is the option Pete would have chosen had Option B not been available. Therefore, the best choice is Option A.

Question 19

For most students,the largest single cost of a college education is

Accepted Answer

The answer of For most students,the largest single cost of...

Question 20

High-school athletes who skip college to become professional athletes

Accepted Answer

High-school athletes who skip college to become professional athletes may have a unique set of opportunities that make the opportunity cost of attending college very high. For example, they may have the chance to earn a substantial income and achieve their dreams without waiting four years to start. Additionally, some athletes may feel that their skills have reached a level where college would not provide any significant improvement to their performance or career prospects. Thus, it can be a rational decision for high-school athletes to skip college and go pro.

Quiz 1: Ten Principles of Economics