Chapter 2, Problem 1P

(a)

To determine

The opportunity cost of studying for the exam.

Explanation of Solution

When the student devotes time to study for the exam, it can make the student score high grades in the exam. However, it is to be noted that the time that student spends for studying can also be used for working and earning a wage or watching some films or playing some games or else studying other subjects. Thus, the money that could have made while working at the time, the leisure that the student could have if used for some other entertainment activities, and so on are the opportunity costs.

Economics Concept Introduction

Opportunity cost: The opportunity cost is the money value of the next best alternative that we foregone while making the choices.

(b)

To determine

The opportunity cost of playing computer game.

Explanation of Solution

The time used for playing the computer game could have been used for studying. It could have helped the student to attain higher grades in the exam which helps to get admission for higher studies or attain good job in future. Otherwise, the time could have spent for other entertainments such as outdoor games or watching movies or meeting friends, and so on. These forms the opportunity cost to the player.

(c)

To determine

The opportunity cost of buying new car.

Explanation of Solution

When the individual purchases a new car, it needs a big amount of money for the purchase. The money spend on the new car could have been utilized for other purposes such as purchasing the household items or the personal needs or on many other goods and services instead of spending on a car. Thus, the value of all other goods and services which might be consumed with the money is the opportunity cost.

(d)

To determine

The opportunity cost of increased property tax.

Explanation of Solution

The increased property tax takes away a higher tax from the people. This reduces the disposable income of the individual. Thus, the goods and services that could have been consumed with the additional income make the opportunity cost of the increased property tax.

(e)

To determine

The opportunity cost of building a space station by a number of countries.

Explanation of Solution

The space station is a very costly investment for every country. The country could have used the money to purchase necessary amenities for the people. Otherwise, the government could have provided tax reduction for its tax payers which would have helped the tax payers to increase their consumption of goods and services. All of these alternatives form the opportunity cost of spending for the space station.

(f)

To determine

The opportunity cost of going for graduation.

Explanation of Solution

The time spent for completing the graduation could have been spent for working and earning an income. Thus, all the income that could have earned through working and the leisure that could have attained through using the time for entertainment activities makes the opportunity cost of the individual.