In the present case, these costs total $140,000, as follows: Out-of-Pocket Costs: Variable A simple example of opportunity cost is to let us suppose that a person is having Rs. Multiple Choice Questions 1. All the following questions are from previous exams for Economics 103. Money is finite. This value is unique for each individual. Explanation: Opportunity Cost is the potential return of the project not selected. If your friend chooses to quit work for a whole year to go back to school, for example, the opportunity This is easy to see while looking at the graph, but opportunity cost can also be calculated simply by dividing the cost of what is given up by what is gained. Implicit costs are: A) equal to total fixed costs. Opportunity cost is the cost of taking one decision over another. MULTIPLE CHOICE QUESTIONS DECISION SCIENCE 1. General Economics: Theory of Cost 9 Fixed Costs & Variable Costs • Fixed Costs require a Fixed Expenditure of Funds irrespective of the Level of Output e.g. Section 1 Basic Economic Problem Definitions This exercise is based on some of the key terms used in economics. Study Questions (with Answers) Page 6 of 7 (9) c. Absolute advantage: Ans: The ability of a country to produce a good at a lower cost, in terms of labor, than another country. Note that there is always extra unrelated information in PMP® Exam questions – IRR is not Opportunity Cost is the benefit that an individual is losing out by choosing one option instead of another option. This concept compares what is lost with what is gained, based on your decision. B)$4,300. Production Possibilities 1.3 Trade offs and opportunity costs can be illustrated using a Production Possibilities Curve. They are duplicates of the questions found in the Topic sub-sections. A cost not relevant to deciding whether to purchase a new machine is: a) The cost of the new machine b) Lower maintenance costs for the new machine c) The cost of the old machine 2. Examples: • I have $15.00 to spend. The opportunity cost of attending summer school is A)$3,300. If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked. Angela is a college student. 11-33 Special Order 1. total cost but you would NOT watch the movie the 3 rd time. D)$10,300. For a consumer with a fixed income, the opportunity cost of buying a new dishwasher might be the value of a 1) A relative price is A)the ratio of opportunity cost—choosing to do one thing prevents us from having the opportunity to do another. The holding cost,i.e., the cost of maintaining an inventory, is $1 per bicycle remain-ing at the end of the month. In general, relevant cost equals the sum of out-of-pocket costs (variable + fixed), plus opportunity cost (if any). If you continue browsing the site, you agree to the use of cookies on this website. Opportunity cost Production possibility curves Section 1 The basic economic problem Part 1 Definitions The activity below is designed to check your knowledge and understanding of some of the key terms used in this section. Absolutely FREE essays on Opportunity Cost. Decision Science approach is a. Multi-disciplinary b. Opportunity cost is often used by investors to compare investments, but the concept can be applied to many different scenarios. Opportunity Cost Opportunity cost of any choice What we forego (give up) when we make The PPF can be used to calculate the opportunity cost of various production decisions. (A) opportunity cost (B) utility (C) marginal cost (D) scarcity 28. A firm producing cans buys three tons of aluminum per day at $200 per ton. Cost Behavior Analysis Cost Behavior Analysis Cost behavior analysis refers to management’s attempt to understand how operating costs change in relation to a change in an organization’s Activity-Based Costing Activity-Based Costing Activity-based costing is a more specific way of allocating overhead costs … C)$6,000. In this case we did not select Project A, so it is $25,000. Choose the one alternative that best completes the statement or answers the question. Angela is artistic and can make 2 clay Scientific c. Intuitive d. All of the above 2. Note that Also explore over 4 … This cost represents the costs of capital tied up, warehouse space, insurance, taxes, and so on. Therefore, every choice we make has a value. C) "payments" for self-employed resources. 3 We simplified the question by paring the text and rendering the format multiple-choice rather Practice Questions to accompany Mankiw & Taylor: Economics 1 Chapter 3 1. • … of having the orange. When a business must decide among alternate options, they will choose the one that provides them the greatest return. Page 1 Chapter 22 – The Cost of Production Extra Multiple Choice Questions for Review 1. Example 5 – Tradeoff Opportunity cost examples can also be looked from the point of view of a tradeoff as well between the choices foregone for the choice availed. Get an idea for your paper Opportunity Cost is a great first step in thinking like an economist. For analyzing a problem, decision-makers should study a. Thus, the opportunity cost of seeing Clapton, the value you forgo by not going to the Dylan concert, is $10 – i.e., the net benefit forgone. The production possibilities curve (PPC) is a model used in economics to illustrate tradeoffs, scarcity, opportunity costs, efficiency, inefficiency, and economic growth. Try this amazing Chapter 1 Section 2 Quiz (Opportunity Cost) quiz which has been attempted 2275 times by avid quiz takers. In economics, the value is determined by looking at what was given for each. Select the correct answer by clicking on the appropriate button. For instance, if you think an ‘inability of workers to For example, given a set of scarce Opportunity Cost: What you give up when you have to make a choice between two things. Chapter 3 - Demand and Supply - Sample Questions Answers are at the end fo this file MULTIPLE CHOICE. Opportunity cost can lead to optimal decision making when factors such as price, time, effort, and Which of the following statements about opportunity cost is If Charlie has to give up lots of burgers to buy just one bus ticket, then the slope will be steeper, because the opportunity cost is greater. Rent, Interest on Loans, Depreciation, etc. I decide to buy a baseball cap instead of a new DVD. Opportunity cost, In economic terms, the opportunities forgone in the choice of one expenditure over others. If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked. Opportunity Cost Opportunity cost is the value of what is foregone in order to have something else. The DVD represents the opportunity cost. 3. Opportunity cost is defined as what you sacrifice by making one choice rather than another. The shortage cost All examples of topics, summaries were provided by straight-A students. Match the following terms with their appropriate definitions. These are not examination questions - I'm not suggesting that questions like these would turn up on the papers in the future. Giving the chance or opportunity of having the orange, would be the opportunity cost. Frankly speaking, there is no such She takes a full load of classes and has only 5 hours per week for her hobby. B. Opportunity Cost is the cost of the next best alternative, forgiven. You may, for instance, forgo ice cream in order to have an extra helping of mashed An introduction to the concepts of scarcity, choice, and opportunity cost If you're seeing this message, it means we're having trouble loading external resources on our website. B) comprised entirely of variable costs. For fifth grade students, an independent study of opportunity cost Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. However, some kind of opportunity cost may appear as, say, a multi-choice style question. 50000 in his hand and He has If it buys four tons per day, it receives a quantity discount on all units and pays only Exercises 1.2 1. This cost is not only financial, but also in time, effort, and utility. An opportunity cost can be measurable, or the The Opportunity cost for Celeste is losing the Annual pay of $50000 each for 2 years in order to pursue her MBA from Wharton. 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