2281 · 1.3
Opportunity cost flashcards
Revision flashcards for Cambridge 2281 Opportunity cost (syllabus 1.3). Flip, recall, then mark a real past-paper question.
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What is opportunity cost?
The next best alternative forgone when a choice is made.
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Why does opportunity cost exist?
Because resources are scarce and wants are unlimited, so choosing one use of a resource means giving up another.
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In what units is opportunity cost measured?
In the alternative given up — hours, goods, output — not simply in money spent.
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What is the opportunity cost of a government building a road instead of a hospital?
The hospital and the healthcare it would have provided.
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What is a free good?
A good that is not scarce, such as air, so using it has no opportunity cost.
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What is an economic good?
A good made from scarce resources, so producing it has an opportunity cost.
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How does a production possibility curve show opportunity cost?
Moving along the curve to make more of one good means giving up some of the other; the amount given up is read from the axes.
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What is the opportunity cost of a worker's leisure time?
The wage that could have been earned by working in that time.
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What is cost–benefit analysis?
Comparing the benefits of a decision with the benefits of the next best alternative to decide whether it is worthwhile.