quiz 2.3

The highest valued alternative that must be given up to engage in an activity is the definition of

opportunity cost

The opportunity cost of attending college might best be described as

the highest-valued alternative use of the student's time.

A student has two options: she can either surf the web or work part-time. Working part-time pays her $20 per hour. What is the student's opportunity cost of surfing the web for 5 hours?

$100

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum. What is the opportunity cost of his decision?

at least $80,000

John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his e-mail. What is the opportunity cost of attending the concert for John?

attending a movie

The opportunity cost of going to an outdoor music festival is

equal to the highest value of an alternative use of the time and money spent on the festival.

The principle of opportunity cost

is applicable to all decision-making.

Amy can study for an hour or spend that hour sleeping or going out for dinner. If she decides to study for the hour, the opportunity cost of the hour spent studying is

sleeping or going out for dinner, whichever she would have preferred the most.

An opportunity cost is

the benefits of the highest-valued alternative forgone.

On Saturday morning, you rank your choices for activities, from most preferred to least preferred, in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is

working out at the gym