chapter  21
Questions and answers
ByBonnie Nguyen, Andrew Wait
Pages 34

What is opportunity cost?

Opportunity cost only includes explicit costs? Discuss.

Which of the following activities involve an opportunity cost for a consumer?

Having a meal tomorrow night that costs $20.

Taking time next weekend to go for a walk.

Sleeping tonight.

Starting a new university degree next year.

All of the above.

Which of the following is not a sunk cost.

The tax a firm needs to pay given it sold one of its properties.

An advertising campaign from last year.

The non-refundable deposit already paid to secure a new factory.

Time spent by senior management at an upcoming corporate retreat.

On a Saturday night, Suzanne went to see a band play some music. If Suzanne had not gone to see the band she would have gone to see a movie. Her third preference was to do some study for her new graduate diploma. Which statement is true?

The opportunity cost of seeing the band is missing the movie.

Because the movie is still running at the cinema, the opportunity cost of seeing the band was not studying.

204The opportunity cost of seeing the band is the benefit of going to the movie, net of the benefit of studying.

With the above information it is not possible to determine the opportunity cost of going to the band.

The opportunity cost of seeing the band is the benefit of seeing the movie and studying.

Give an example of two variables that move together, but that are otherwise unrelated. Relate your answer to correlation and causation.