Economic Costs and Opportunity Costs Quiz

Test your knowledge on economic costs, opportunity costs, and their implications with this insightful quiz on cost economics.

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2. Which of the following is an example of an opportunity cost?

The cost of raw materials

The salary paid to employees

The profit earned by the business

The income foregone by choosing one investment over another

15. In the context of economic decision-making, what does the term 'marginal' refer to?

The total amount of a good or service

The additional or incremental change in a variable

The average value of a variable

The opportunity cost of a decision

1. What is economic cost?

The monetary value of goods and services produced in a country

The total expenses incurred by a business

The value of resources used to produce a good or service, including opportunity costs

The total revenue generated by a business

4. In economic terms, what does the law of increasing opportunity cost state?

As production increases, the opportunity cost decreases

The more resources already devoted to an activity, the smaller the payoff of devoting additional resources to that activity

Opportunity cost remains constant regardless of production levels

Opportunity cost is not relevant in economic decision-making

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

The cost of raw materials for future production

A non-refundable deposit on a leased property

Variable costs associated with production

The salary of an employee

8. What is the relationship between economic cost and accounting cost?

They are always equal

Economic cost is always greater than accounting cost

Accounting cost includes explicit costs, while economic cost includes both explicit and implicit costs

Economic cost is only relevant for large businesses

11. What is the opportunity cost of a decision?

The actual monetary cost incurred

The value of the next best alternative foregone

The total explicit costs

The total implicit costs

13. What is the relationship between scarcity and opportunity cost?

Scarcity and opportunity cost are unrelated concepts

Scarcity leads to opportunity cost as choices must be made due to limited resources

Opportunity cost eliminates the concept of scarcity

Scarcity and opportunity cost are synonymous

3. How is opportunity cost calculated?

Total revenue divided by total cost

Total cost minus total benefit

The value of the next best alternative foregone

The difference between fixed and variable costs

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5. Which of the following is an implicit cost?

Rent paid for office space

Wages paid to employees

The value of the owner's time spent working in the business

The cost of utilities

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6. What is the formula for calculating total economic cost?

Total revenue minus explicit costs

Total revenue minus implicit costs

Total revenue plus explicit costs

Total revenue plus implicit costs

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9. How does the concept of diminishing marginal returns relate to opportunity cost?

As production increases, opportunity cost decreases

Opportunity cost is not affected by changes in production

As more resources are devoted to a particular activity, the opportunity cost of those resources increases

Diminishing marginal returns do not impact opportunity cost

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10. What is the key difference between economic profit and accounting profit?

Economic profit includes implicit costs, while accounting profit only considers explicit costs

Accounting profit includes implicit costs, while economic profit only considers explicit costs

They are synonymous and have no difference

Economic profit is only relevant for non-profit organizations

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12. How does a production possibilities curve illustrate opportunity cost?

It shows the total economic cost of production

It demonstrates the trade-off between different goods or services that can be produced with limited resources

It only represents explicit costs

It measures accounting profit