Opportunity Cost
The cost of any action must account for the alternatives that are sacrificed. In general, if choosing to do action A prevents you from doing action B, then the inability to do B is considered a part of the cost of doing A. This cost, which arises from forgoing the opportunity to do B, is known as the opportunity cost.
0
1
Tags
Social Science
Empirical Science
Science
Economics
Economy
Introduction to Microeconomics Course
CORE Econ
Ch.2 Technology and incentives - The Economy 2.0 Microeconomics @ CORE Econ
Ch.3 Doing the best you can: Scarcity, wellbeing, and working hours - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
Introduction to Macroeconomics Course
Ch.5 Macroeconomic policy: Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
Related
Market Economy Definition
Scarcity
Marginal Changes
Types and Purposes of Taxes
Market Failure
A student has a non-refundable, pre-paid ticket to a concert tonight that cost $50. A friend offers them a last-minute babysitting job for the same evening that pays $70. The student cannot do both. If the student's only two options are to go to the concert or to babysit, what is the opportunity cost of choosing to go to the concert?
Airline Ticket Pricing Decision
A chemical factory operates near a river, producing a valuable product that is sold nationwide. As a byproduct of its manufacturing process, the factory discharges waste into the river. This significantly reduces the fish population, harming the businesses of local fishing companies that rely on the river. The factory does not compensate the fishing companies for this damage. This uncompensated impact on the fishing companies is a classic example of what economic concept?
A city government has a fixed annual budget and must decide how to allocate its funds. The city council wishes to build a new public library, upgrade the water treatment facility, and repave several major roads. The combined cost of these projects is greater than the total budget available. The necessity of choosing which projects to fund and which to postpone is a direct result of what fundamental economic concept?
Identifying the Business Cycle Phase
Productivity and Standard of Living
An individual places $1,000 in a savings account that yields a 1% annual interest rate. During the same year, the economy experiences an overall price increase of 3% for goods and services. At the end of the year, what has happened to the purchasing power of the individual's savings?
Evaluating a Congestion Charge Policy
A government decides to increase its spending on public infrastructure projects, such as building new roads and bridges. To finance this, the government increases the tax on gasoline. As a result of this decision, the government has fewer funds available to upgrade the national park system. Which of the following core economic concepts is LEAST directly illustrated by this scenario?
Match each economic scenario with the primary economic concept it illustrates.
Mutually Exclusive Alternatives
Opportunity Cost
Definition of Opportunity Cost
A software developer has a budget of $1,000 and one week to add a new feature to an application. They can choose to build either a new reporting dashboard or an improved user authentication system. Both projects are estimated to take the full week and cost the full $1,000. What is the most fundamental economic consequence of choosing to build the new reporting dashboard?
A city council has allocated a specific budget for a single new public works project. They are deciding between building a new public swimming pool or constructing a new community library. Since choosing one project means they cannot build the other with the current budget, these two projects are examples of complementary goods.
Weekend Time Allocation
Coffee Shop Investment Decision
Match each scenario with the economic relationship that best describes the choices involved.
Career Path Decision
A student has only two hours available for studying on a given evening and can prepare for either their economics exam or their history exam, but not both. Because the choice to study for one exam prevents them from studying for the other, these two activities are considered ____ exclusive.
Opportunity Cost
A small business owner has enough capital to invest in one new project. After research, they have identified three distinct projects: upgrading their computer systems, launching a new marketing campaign, or renovating their storefront. Arrange the following actions into the most logical sequence for making a rational economic decision.
A farmer owns a single plot of land suitable for growing crops. For the upcoming season, the farmer determines that they can either plant a full crop of corn or a full crop of soybeans, but there is not enough space or resources to plant both. Which statement best analyzes the economic relationship between planting corn and planting soybeans in this scenario?
A car manufacturing plant has a single assembly line that can be configured to produce either sedans or SUVs. Reconfiguring the line from one vehicle type to the other is a time-consuming process. Given this setup, why is the decision to produce sedans for the next quarter considered mutually exclusive with the decision to produce SUVs for the same quarter?
Learn After
Comparing Alternatives in Decision-Making (Concert vs. Babysitting)
Decision-Making for a Taxi Driver (Australian Open vs. Work)
Choosing Between a Paid Theatre Concert and a Free Park Concert
Scarcity
Reservation Option
You have a free ticket to a concert tonight which you value at $50. You could, instead, work a shift at your job and earn $70, or you could babysit for a neighbor and earn $40. Assuming these are your only three options and you can only choose one, what is the opportunity cost of attending the concert?
Analyzing a Summer Decision
Evaluate the following statement: A person has three mutually exclusive options for their evening: 1) Go to a concert they value at $50, 2) Work a shift and earn $80, or 3) Read a book they value at $20. If they decide to work the shift, their opportunity cost is $70, representing the sum of the values of the concert ($50) and the book ($20) that they gave up. True or False?
For each economic decision described below, match it with the correct statement of its opportunity cost.
Analyzing the True Cost of a Decision
Explaining Opportunity Cost
A student has three mutually exclusive options for their Saturday afternoon: they can work a 4-hour shift at the campus library for $15 per hour, go to a movie with friends which they value at $40, or take a paid online survey that will earn them a total of $50. If the student chooses to work at the library, the opportunity cost of this decision is $____.
An individual has decided to spend their Saturday afternoon working a part-time job. To correctly identify the opportunity cost of this decision, they must follow a logical process. Arrange the following steps into the correct sequence.
The Baker's Dilemma
Alex is deciding how to spend their Friday night. They can either go to a movie, for which a ticket costs $12 and which they value at $30, or they can work a tutoring session and earn $40. These are Alex's only two options. What is the opportunity cost of choosing to go to the movie?
Economic Profit vs. Accounting Profit
Decision making under scarcity
Shareholder Investment Principle
Economic Cost
Wage as the Opportunity Cost of Free Time
Karim's Work-Leisure Decision in Madrid
Economic Rent