ECONOMICS (CBSE/UGC NET)

ECONOMICS

OPPORTUNITY COST

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Identify an example of the following term:opportunity costs
A
During World War II, only a certain amount sugar & gasoline were allowed for purchase
B
The citizens of the United States giving up certain goods, such as sugar, in exchange for freedom provided by the war
C
Resources shifted from the citizens to the World War II effort
D
Using margarine instead of butter
Explanation: 

Detailed explanation-1: -A student spends three hours and $20 at the movies the night before an exam. The opportunity cost is time spent studying and that money to spend on something else. A farmer chooses to plant wheat; the opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment).

Detailed explanation-2: -For example, choosing public transportation to travel to a particular destination by foregoing the option of traveling in one’s own car is a good example of opportunity cost, because you end up saving money which needs to be spent on fuel.

Detailed explanation-3: -When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can’t spend the money on something else.

Detailed explanation-4: -A simple example of opportunity cost is to let us suppose that a person is having Rs. 50000 in his hand and He has the option to keep it with himself at home or deposit in the bank which will generate interest of 4% annually so now the opportunity cost of keeping money at home is Rs. 2000 per year as opposed to Bank.

There is 1 question to complete.