Opportunity Cost – Flashcards
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Define the phrase "Thinking at the Margin."
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The decision on whether or not to use an additional unit of something.
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What does the phrase "Choosing is Refusing" mean?
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It means that one faces an opportunity cost for each decision that is made and that when a choice is made between alternatives one is accepted the other is refused.
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The government is trying to maintain the infrastructure of the country, provide Social Security benefits to citizens, and regulate airline security. Congress has a budget for spending on all three of $1 billion. They decide to spend 45% on infrastructure, 45% on Social Security Benefits, and 10% on regulating airline security. Based on the information provided in this situation, which of the following best describes the opportunity cost?
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The government will be able to improve the road system, encouraging more people to drive on vacations. Social Security benefits will provide income for the elderly and disabled, allowing them to spend money, thus boosting the economy. Airline security might be slightly improved because of the ability to hire, but there will not be enough money to provide the latest equipment.
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What is opportunity cost?
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The most desirable alternative given up as a result of a decision.
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Give an example of a business trade-off.
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An example would be an increase use of technology or an increase use of labor.
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Why are there trade-offs?
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Because there are a limited number of resources.
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If you had a choice between playing golf or going to the movies and you chose to go to the movies, what is the opportunity cost of your decision.
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The opportunity cost is not playing golf.
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Give an example of a society trade-off.
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The government an spend money on national defense or money on welfare.
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When a decision is made, what two things is a decision maker considering?
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The cost and benefit at the margin.
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Tom had to choose between spending $45 on a concert ticket or on groceries. Since he bought the groceries, we know that the opportunity cost of getting the ticket was __________.
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too high
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For high school graduation, Ryan's family is giving him a choice between two presents that are both worth $900. He can choose either a new laptop that's loaded with graphic design programs he will need for art school, or he can choose to go to a surf camp in Mexico with three of his best friends from high school.
What is the opportunity cost if Ryan chooses the laptop?
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The shared experience and memories with high school friends before they part ways
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The government of a country must make a decision between spending money on a hospital or spending the same amount on border security. What kind of decision is this?
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guns or butter
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"Choosing is Refusing" means individuals face an opportunity cost with each decision they make.
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true
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When you are thinking on the margin, the factor that should most influence your decision is most closely described by which of the following terms _________
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opportunity cost
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Economists state that every decision involves trade-offs. Economists measure and define these trade-offs as:
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opportunity costs.
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Which of the following is the kind of decision that can be made at the margin?
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whether or not to hire new workers
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Phrase that refers to the trade-off that nations face when choosing whether to produce more or less military or consumer goods.
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guns or butter
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Opportunity cost is the least desirable alternative given up as a result of a decision.
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false
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all the possible alternatives that are rejected when a choice is made
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trade-offs
