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Quizzes > High School Quizzes > Social Studies

Calculating Opportunity Cost Practice Quiz

Explore Key Concepts of Opportunity Cost and Comparative Advantage

Difficulty: Moderate
Grade: Grade 11
Study OutcomesCheat Sheet
Paper art illustrating trivia for Opportunity Advantage Showdown, a quiz for economics students.

What is opportunity cost in economics?
The total cost of all chosen alternatives
The monetary price paid for a decision
The benefit that is given up when choosing one alternative over another
The cost of all available resources
Opportunity cost represents the value of the next best alternative that is forgone when a choice is made. It is a fundamental concept in economics used to analyze decision making.
What does comparative advantage refer to?
Having the absolute highest production of a good
The overall cost of production inputs
The ability to produce a good at a lower opportunity cost than others
The benefit of producing all goods domestically
Comparative advantage is about producing goods at a lower opportunity cost relative to other producers. This concept explains why trade can be beneficial even if one party is more efficient in every activity.
Which statement best describes a trade-off?
A decision that eliminates all risks
A situation that requires sacrificing one goal or benefit to achieve another
An opportunity to gain more than one benefit at the same time
A scenario where all alternatives are equally beneficial
A trade-off involves choosing one option at the expense of another. It is a key idea in economics because resources are scarce and priorities must be set.
How can the Production Possibility Frontier (PPF) be interpreted?
It illustrates the maximum possible combinations of two goods that can be produced with fixed resources and technology
It displays the consumer preferences for different goods
It shows the profit levels of different production choices
It represents the total cost of production
The PPF demonstrates the maximum efficient production levels of two goods given limited resources. It visually shows the trade-offs between the production of different goods.
If a student chooses to study economics instead of participating in a school play, what is the opportunity cost?
The enjoyment and experience of performing in the play
The extra credit received from academic work
The knowledge gained from studying economics
The time spent preparing for a test
Opportunity cost is the benefit of the next best alternative that is given up. In this case, by choosing to study economics, the student forgoes the experience and enjoyment of acting in the play.
In a country that can produce either 100 units of wheat or 50 units of corn, what is the opportunity cost of producing one unit of corn?
0.5 units of wheat
50 units of wheat
2 units of wheat
1 unit of wheat
If the country produces 50 units of corn instead of 100 units of wheat, then each unit of corn corresponds to a sacrifice of 2 units of wheat. This ratio represents the opportunity cost per unit of corn.
An economy can produce either 20 computers or 40 smartphones in a day. What is the opportunity cost of producing one computer?
2 smartphones
1 smartphone
20 smartphones
0.5 smartphone
The economy sacrifices 40 smartphones to produce 20 computers, so producing one computer costs an opportunity of 2 smartphones. This calculation shows the trade-off between the two goods.
A country should specialize in producing a good if it has:
A lower opportunity cost in producing that good
More diversified resources
Better technology in all areas
A higher absolute production capacity for that good
Specialization is based on comparative advantage, meaning a country should produce the good for which it sacrifices the least amount of other goods. This is determined by the lower opportunity cost in its production process.
How does opportunity cost influence production decisions?
It helps evaluate the benefits of the next best alternative
It is irrelevant when resources are abundant
It determines only the monetary expenses involved
It solely focuses on maximizing output
Opportunity cost is key for understanding the benefits that are foregone by not choosing the next best alternative. This helps in making informed production and resource allocation decisions.
Consider a factory that can produce either 200 gadgets or 100 widgets in a day. What is the opportunity cost of producing one additional gadget?
100 widgets
2 widgets
0.5 widget
1 widget
When the factory produces 200 gadgets at the expense of 100 widgets, each gadget costs 0.5 widget in opportunity terms. This outcome is derived by dividing the total sacrifice (100 widgets) by the output (200 gadgets).
A country can produce either 80 tons of rice or 40 tons of corn. What is the opportunity cost of producing one ton of rice?
2 tons of corn
1 ton of corn
40 tons of corn
0.5 ton of corn
For 80 tons of rice production, the country forgoes 40 tons of corn, meaning each ton of rice has an opportunity cost of 0.5 ton of corn. This ratio is crucial for comparing production efficiencies.
Which scenario best illustrates gains from trade?
Both countries maintaining complete self-sufficiency
Countries specializing based on their lower opportunity costs and then trading
Two nations producing all goods by themselves
A country exporting goods where it has no efficiency advantage
Gains from trade occur when countries specialize in goods for which they have a comparative advantage and then trade. This specialization enables each to enjoy more of both goods than if they produced everything on their own.
Given that Country X can produce 10 cars or 30 trucks, and Country Y can produce 8 cars or 16 trucks per day, which country has a comparative advantage in producing cars?
Both have absolute advantage in different sectors
Country Y
Country X
Neither; both have equal opportunity costs
For Country X, the opportunity cost of one car is 3 trucks (30/10), while for Country Y, it is 2 trucks (16/8). Since Country Y sacrifices fewer trucks per car, it has the lower opportunity cost and hence a comparative advantage in cars.
Why do economists focus on the next best alternative when discussing opportunity cost?
Because it ensures maximum output
Because it is always measurable in monetary terms
Because there are no other alternatives available
Because it represents the forgone benefit of the most valuable alternative not chosen
Economists consider the next best alternative because it shows what is sacrificed when a decision is made. This approach highlights the cost of forgoing the most valuable option among the alternatives.
A concave Production Possibility Frontier (PPF) for an economy producing 'guns' and 'butter' indicates:
No trade-offs in production
Increasing opportunity cost as more of one good is produced
Constant opportunity cost between the two goods
Decreasing opportunity cost as production shifts
A concave PPF reflects the law of increasing opportunity costs, meaning that producing additional units of one good requires larger sacrifices of the other good. This shape typically arises due to resources not being perfectly adaptable to the production of both goods.
How does an improvement in technology for producing a good affect a nation's comparative advantage?
It decreases the opportunity cost, thereby enhancing specialization in that good
It increases the opportunity cost of producing that good
It results in a complete shift to producing only that good
It has no effect on comparative advantage
Technological improvements typically reduce the resources needed to produce a good, thereby lowering its opportunity cost. This change can enhance a nation's comparative advantage in that area, influencing its specialization and trade decisions.
A company with limited resources must decide between producing standard and advanced smartphones. Diverting resources to produce advanced smartphones reduces output of standard ones. This scenario best exemplifies:
Economies of scale
Comparative advantage in production
A trade-off due to opportunity cost in resource allocation
Fixed costs influencing production
The decision to allocate resources from one product to another demonstrates a trade-off, where increasing the production of one good causes a reduction in the production of another. This is a clear example of opportunity cost at work in resource allocation.
When considering both opportunity cost and absolute advantage, which statement is most accurate?
Comparative advantage depends solely on the amount of resources available
Absolute advantage always guarantees a comparative advantage
Comparative advantage becomes irrelevant if absolute advantages exist
A country can have an absolute advantage in all goods but still benefit from trade by specializing based on lower opportunity costs
Even if a country is more efficient overall (absolute advantage), it must consider opportunity costs to determine which goods to specialize in. Specializing according to comparative advantage allows all trading partners to benefit from trade, even when one is better at producing everything.
Two workers, A and B, are considered for specialization. Worker A can complete 2 designs or 5 codes per hour, while Worker B can complete 3 designs or 6 codes per hour. Which worker has a comparative advantage in coding?
Neither shows a clear comparative advantage
Worker A
Both have equal comparative advantage
Worker B
Worker A's opportunity cost for one code is 2 designs divided by 5 codes, which equals 0.4 design per code. Worker B's opportunity cost is 3 designs divided by 6 codes, or 0.5 design per code. Since Worker A sacrifices fewer designs per unit of code produced, Worker A has the comparative advantage in coding.
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Study Outcomes

  1. Analyze the concept of opportunity cost in economic decision-making.
  2. Calculate trade-offs to determine efficient resource allocation.
  3. Evaluate comparative advantage to understand production benefits.
  4. Apply strategic decision-making concepts to classroom scenarios.
  5. Synthesize key economic principles for competitive exam preparation.

Calc. Opp. Cost & Comp. Advantage Cheat Sheet

  1. Understand Absolute vs. Comparative Advantage - Absolute advantage is about who can crank out more goods with the same resources, while comparative advantage zooms in on producing at the lowest opportunity cost. Mastering this distinction explains why countries trade and everyone ends up better off! Pearson: PPF, Comparative & Absolute Advantage
    2. Pearson: PPF, Comparative & Absolute Advantage
  2. Calculate Opportunity Cost Accurately - To find opportunity cost, divide how much of Good B you give up to make one more unit of Good A. This quick calculation reveals who really has the edge in producing each good! Pearson: Opportunity Cost Formula
    3. Pearson: Opportunity Cost Formula
  3. Apply the "Other Over" Formula for Outputs - When you've got output numbers, use "Other Over": Opportunity Cost of 1 A = B over A. It's a neat shortcut that makes crunching numbers in production problems a breeze! ReviewEcon: Output Formula
    4. ReviewEcon: Output Formula
  4. Use the "It Over" Formula for Inputs - With input data, switch to "It Over": Opportunity Cost of 1 A = A over B. This method is your go-to when the question hands you inputs instead of outputs. ReviewEcon: Input Formula
    5. ReviewEcon: Input Formula
  5. Recognize the Benefits of Specialization - Specializing in the good where you have a comparative advantage and then trading can push your consumption beyond what you could make alone. This teamwork boosts total output and keeps everyone smiling! OpenStax: Specialization & Trade
    6. OpenStax: Specialization & Trade
  6. Understand Terms of Trade - Terms of trade are the agreed-upon exchange rate between two goods. If this rate lies between both producers' opportunity costs, everyone gains from trading - talk about a win-win! ReviewEcon: Terms of Trade
    7. ReviewEcon: Terms of Trade
  7. Analyze Production Possibility Frontiers (PPFs) - PPFs graphically show the max you can produce of two goods given resources. They're fantastic visuals for seeing opportunity costs, efficiency, and the magic of trade expansion. Pearson: PPF Diagrams
    8. Pearson: PPF Diagrams
  8. Practice with Real-World Examples - Apply these concepts to actual country trades - like the U.S. vs. Saudi Arabia - to see comparative advantage in action. This hands-on twist cements your knowledge and makes you feel like a global economist! OpenStax: Real-World Cases
    9. OpenStax: Real-World Cases
  9. Utilize Mnemonic Devices - Keep "Other Over" for outputs and "It Over" for inputs firmly in your brain. These catchy mnemonics are like sticky notes that save you precious time under exam pressure! ReviewEcon: Mnemonic Tricks
    10. ReviewEcon: Mnemonic Tricks
  10. Engage in Interactive Learning - Jump into quizzes, flashcards, or group games to transform dry theory into a fun competition. Interactive study keeps you alert, makes concepts stick, and keeps boredom at bay! ReviewEcon: Interactive Tools
    11. ReviewEcon: Interactive Tools
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