Exam code: 0455 & 0987
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Define opportunity cost.
Opportunity cost is the loss of the next best alternative when a choice is made.
Why do economic agents face opportunity cost when making decisions?
Economic agents face opportunity cost because resources are limited and they must choose between competing alternatives.
What does it mean to weigh up costs and benefits in decision-making?
Weighing up costs and benefits means comparing what you gain to what you give up when making a decision.
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Define opportunity cost.
Opportunity cost is the loss of the next best alternative when a choice is made.
Why do economic agents face opportunity cost when making decisions?
Economic agents face opportunity cost because resources are limited and they must choose between competing alternatives.
What does it mean to weigh up costs and benefits in decision-making?
Weighing up costs and benefits means comparing what you gain to what you give up when making a decision.
How can considering opportunity cost lead to a more efficient or valuable outcome?
Considering opportunity cost can cause decision-makers to choose the option that offers greater overall benefit after accounting for what must be given up, leading to more efficient or valuable outcomes.
True or False?
Consumers only face opportunity cost when spending money, not time or effort.
False.
Opportunity cost can involve money, time, or other resources, not just financial expenditure.
Why did Ashika choose the more expensive flight to Iceland?
Ashika chose the more expensive flight because the opportunity cost of missing a day's work (lost income) was greater than the savings from the cheaper ticket.
What non-monetary opportunity cost did Ric consider when choosing between jobs?
Ric considered the loss of free time and flexibility as the opportunity cost of the higher paying job that required commuting.
Why did the avocado firm decline the supermarket contract?
The firm declined the supermarket contract because the opportunity cost of lost revenue from loyal customers was greater than the prestige of supplying a large retailer.
What opportunity cost did the Australian government consider when cancelling the French submarine deal?
The Australian government considered the opportunity cost of damaging relations with the USA and determined maintaining strong ties with the USA was more beneficial.
Give an example of opportunity cost for a government in deciding whether to spend additional funds on education.
If a government chooses to spend more on education, the opportunity cost is the healthcare improvements that could have been funded.