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Chapter 2: Q 1 (page 45)

Define opportunity cost. What is your opportunity cost of attending a class at 11:00 A.M.? How does it differ from your opportunity cost of attending a class at 8:00 A.M.?

Short Answer

Expert verified

Opportunity cost is the opportunity forgone in order to gain benefit from the next best alternative.

If you are early riser the opportunity cost at 8:00A.M. is lower than at 11:00A.M.

If you value your sleep more the opportunity cost at 11:00A.M. is higher than at 8:00A.M.

Step by step solution

01

Step 1. Given Information.

The objective is to define opportunity cost. Explain the opportunity cost of attending class at 11:00 A.M. and attending class at 8:00 A.M.

02

Step 2. Opportunity cost.

Opportunity cost is the lost opportunity to obtain the satisfaction of the next best alternative among the available choices.

03

Step 3. The opportunity cost of attending class.

The cost of the opportunity will be less to attend the class at 8:00 a.m. than to attend the class at 11:00 a.m. if you are an early riser because you will have time available for various activities.

The opportunity cost of attending class at 11:00 AM will be higher than attending class at 8:00 AM if you value an extra hour of sleep.

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Most popular questions from this chapter

A nation’s residents can allocate their scarce resources either to producing consumer goods or to producing human capital—that is, providing themselves with training and education. The following table displays the production possibilities for this nation:

Production CombinationUnits of Consumer GoodsUnits of Human Capital
A0100
B1097
C2090
D3075
E4055
F5030
G600

(a) Suppose that the nation’s residents currently produce combination A. What is the opportunity cost of increasing the production of consumption goods by 10 units? By 60 units?

(b) Does the law of increasing additional costs hold true for this nation? Why or why not?

Based on the information in Problems 2-15, should you and your roommate specialize in a particular task? Why? And if so, who should specialize in which task? Show how much labor time you save if you choose to “trade” an appropriate task with your roommate as opposed to doing it yourself.

Construct a production possibilities curve for a nation facing increasing opportunity costs for producing food and video games. Show how the PPC

changes have given the following events.

(a) A new and better fertilizer is invented.

(b) Immigration occurs, and immigrants’ labor can be employed in both the agricultural sector and the video game sector.

(c) A new programming language is invented that is less costly to code and is more memory-efficient, enabling the use of smaller game cartridges.

(d) A heat wave and drought result in a 10 percent decrease in usable farmland.

Distinguish between absolute and comparative advantage.

Suppose that in Fig 2-2, the nation currently is producing combination D in the table and on the graph of the production possibilities curve. What is the opportunity cost of producing 5 million more smartphones and moving to production combination C?
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