Register to view this lesson Are you a student or a teacher? Opportunity cost and comparative advantage. This printable quiz and worksheet will test your understanding of opportunity cost in real life situations. The total opportunity cost would be $34,000, which would be equal to the sum of the explicit costs ($15,000) and implicit costs ($19,000). These questions are from Chapter 1 Section 2. This means that the true cost of a year of college is the tuition plus the opportunity cost of not working. The table shows the opportunity cost of each pair of points on the chart to see the law in an example. Also explore over 4 similar quizzes in this category. Opportunity cost is a term economists use to describe the relationship between what an item adds to your life, and how much it might cost you by not having it, taking into account your other options. Opportunity cost and a free good. The theory of comparative advantage states that countries should specialise in producing goods where they have a lower opportunity cost. 26) As the opportunity cost of a good decreases, people buy A)more of that good but less of its complements. Directions This quiz contains 15 multiple choice questions. Quiz on the PPC, Opportunity Cost, and the Gains from Trade. C)less of that good but more of its complements. After you have finished the quiz, click on the Grade my Quiz button at the bottom of the page. Opportunity cost definition is - the added cost of using resources (as for production or speculative investment) that is the difference between the actual value resulting from such use and that of an alternative (such as another use of the same resources or an investment of equal risk but greater return). The Production Possibilities Curve (PPC) is a model used to show the tradeoffs associated with allocating resources between the production of two goods. So the opportunity cost of buying an SUV includes an alternative option, such as buying a less expensive sedan. Simply put, the opportunity cost is what you must forgo in order to get something. If there is no opportunity cost in consuming a good, we can term it a free good. If your friend chooses to quit work for a whole year to go back to school, for example, the opportunity cost of this decision is the year’s worth of lost wages. What is opportunity cost? Opportunity cost is often used by investors to compare investments, but the concept can be applied to many different scenarios. The benefit or value that was given up can refer to decisions in your personal life, in a company, in the economy, in the environment, or on a governmental level. Opportunity cost is the value of something when a particular course of action is chosen. B)less of that good and also less of its complements. Select the correct answer by clicking on the appropriate button. 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