Chapter 2.1

A firm can produce 10 units of product A or 16 units of product B by utilizing all the available resources. Suppose the firm chooses to utilize its resources to produce one unit of product B. The opportunity cost faced by the firm, in this case, will be _____.

0.6 units of product A

A firm can produce 10 units of product A or 16 units of product B by utilizing all the available resources. Suppose the firm decides to utilize its resources to produce one unit of product A. The opportunity cost of the firm's choice to produce that unit will be:

1.6 units of product B.

Economic decision makers should

Ignore sunk costs while making choices.

Robert and Jackson both work at an accountant's office. Their major tasks involve responding to client queries through emails and preparing financial statements. Robert can respond to 20 emails in an hour or prepare 2 financial statements, whereas Jackson can respond to 35 emails in an hour or prepare 1 financial statement. Which of the following is true?

Jackson has a lower opportunity cost of replying to client queries than Robert has.

Which of the following is true about opportunity cost?

Opportunity cost may vary with circumstances.

The value of the best alternative activity that is forgone is known as:

Opportunity cost.

Which of the following is an example of a sunk cost?

Robert's investment in an unsuccessful business venture.

A cost that has already been incurred and cannot be recovered is called a(n):

Sunk cost.

Olivia has been looking for a new apartment and finds two apartments that fit her requirements and budget. Apartment A is in the city center and is close to her office. Apartment B is in the suburbs and it will take an hour each day for Olivia to commute from Apartment B to her office. Both the apartments cost $25,000. However, apartment A is located in a noisy and polluted neighborhood, whereas apartment B is located in a green and pollution-free locality. The opportunity cost of choosing apartment B is:

The distance from the city center.

Olivia has been looking for a new apartment and finds two apartments that fit her requirements and budget. Apartment A is in the city center and is close to her office. Apartment B is in the suburbs, and it will take an hour each day for Olivia to commute from Apartment B to her office. Both the apartments cost $25,000. However, apartment A is located in a noisy and polluted neighborhood, whereas apartment B is located in a green and pollution-free locality. The opportunity cost of choosing apartment A over apartment B is:

The green and pollution-free locality.

Amanda can choose between two alternatives after high school. She can either attend a university or work at her father's grocery store. Amanda will have to pay $9,000 for tuition and fees to enroll in the university. However, if she decides to work at the grocery store, she will earn $500 per week. If Amanda decides to go to college, the opportunity cost of her decision will be:

The weekly wage of $500 she could have earned if she had decided to work at the grocery store.

In terms of opportunity cost, _____ is the ultimate constraint.

Time