3 Oppurtunity cost

Question 1

Opportunity Cost

Answer 1

Cost of the next best alternative forgone when a decision is made

Question 2

A rational person would choose

Answer 2

The option that has the smallest opportunity cost

Question 2

Trade-offs

Answer 2

• A sacrifice that is made in order to gain something
• the willingness of an economic agent to give up one thing for another

Question 3

Shifts in the PPC

Answer 3

• increase in the quantity or the quality of raw materials
• increase in the quantity or the productivity of the labour available
• increase in the quantity or the productivity of the capita available

Question 4

USefulness of the concept of opportunity cost

Answer 4

• producers deciding whether t invest in a new piece of machinery or not
• Consumers deciding whether to purchase a new car
• Governments deciding to spend on education or healthcare