#1
2. Which of the following is an example of an opportunity cost?
The income foregone by choosing one investment over another
ExplanationOpportunity cost is exemplified by the income lost when opting for one investment over another.
#2
15. In the context of economic decision-making, what does the term 'marginal' refer to?
The additional or incremental change in a variable
ExplanationIn economic decision-making, 'marginal' pertains to the incremental change in a variable.
#3
1. What is economic cost?
The value of resources used to produce a good or service, including opportunity costs
ExplanationEconomic cost encompasses the value of resources used, including the opportunity cost of alternative uses.
#4
4. In economic terms, what does the law of increasing opportunity cost state?
The more resources already devoted to an activity, the smaller the payoff of devoting additional resources to that activity
ExplanationThe law of increasing opportunity cost posits that dedicating more resources to an activity yields diminishing returns.
#5
7. Which of the following is an example of a sunk cost?
A non-refundable deposit on a leased property
ExplanationA sunk cost is illustrated by a non-refundable deposit, representing an irrecoverable expense.
#6
8. What is the relationship between economic cost and accounting cost?
Accounting cost includes explicit costs, while economic cost includes both explicit and implicit costs
ExplanationAccounting cost covers explicit costs, while economic cost encompasses both explicit and implicit costs.
#7
11. What is the opportunity cost of a decision?
The value of the next best alternative foregone
ExplanationThe opportunity cost of a decision is the value of the best alternative forgone.
#8
13. What is the relationship between scarcity and opportunity cost?
Scarcity leads to opportunity cost as choices must be made due to limited resources
ExplanationScarcity prompts opportunity cost, necessitating choices due to resource limitations.
#9
3. How is opportunity cost calculated?
The value of the next best alternative foregone
ExplanationOpportunity cost is determined by assessing the value of the best alternative foregone.
#10
5. Which of the following is an implicit cost?
The value of the owner's time spent working in the business
ExplanationImplicit cost includes the value of the owner's time dedicated to the business.
#11
6. What is the formula for calculating total economic cost?
Total revenue plus implicit costs
ExplanationTotal economic cost is the sum of total revenue and implicit costs.
#12
9. How does the concept of diminishing marginal returns relate to opportunity cost?
As more resources are devoted to a particular activity, the opportunity cost of those resources increases
ExplanationDiminishing marginal returns indicate that dedicating more resources to an activity heightens the opportunity cost of those resources.
#13
10. What is the key difference between economic profit and accounting profit?
Economic profit includes implicit costs, while accounting profit only considers explicit costs
ExplanationEconomic profit incorporates implicit costs, whereas accounting profit focuses solely on explicit costs.
#14
12. How does a production possibilities curve illustrate opportunity cost?
It demonstrates the trade-off between different goods or services that can be produced with limited resources
ExplanationA production possibilities curve depicts the trade-off between various goods or services that can be produced with constrained resources, showcasing opportunity cost.