Frequent Exam Questions with Answers
Opportunity Costs
Chapter 1 ― Question 1
The opportunity costs of attending college are highest for a student
- who could work in his father's factory for a high salary
- who chooses an expensive college
- who comes from a poor family
- who must find himself a job to finance his studies
*A. Remember that opportunity costs are the rewards of what you give up. Answers B, C and D relate to the real costs, not to opportunity costs.
Chapter 1 ― Question 7
An economist plans to go on a vacation. He knows the costs like airfares, hotel accommodation, etc. He also knows the benefits as he made the same trip last year. How can he make a cost-benefit analysis, when the costs are expressed in money and the benefits in pleasure?
* He looks at the opportunity costs of the costs and the benefits. The opportunity costs of the costs consist in the things he could buy if he did not spend his money on the vacation. The opportunity costs of the benefits are the benefits of his alternatives to travelling, for instance, the remuneration for a summer course or the knowledge he could acquire through reading during the summer vacation.
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