You spend a Saturday afternoon playing video games instead of working a 4-hour shift at $15/hour or studying for an exam you feel prepared for. What is the opportunity cost of gaming?
A$60, because that is what you could have earned
BThe combined value of the work shift plus studying
CThe value of whichever alternative you valued most — likely $60 if the job was your best option
DZero, because you chose freely
Opportunity cost is the value of the single best alternative foregone, not the sum of all alternatives. If working ($60) was the most valuable option you gave up, that is the opportunity cost. Summing all alternatives is a common error — you could only have done one other thing with that time.
Question 2 True / False
A student who attends a free university (zero tuition) still faces an opportunity cost of attending college.
TTrue
FFalse
Answer: True
Opportunity cost is not just monetary. Even with free tuition, a student gives up the income they could have earned by working full-time, plus time that could go toward other pursuits. These foregone alternatives — especially foregone wages — are real opportunity costs even when no money changes hands.
Question 3 Short Answer
Why does scarcity force every economic decision to have an opportunity cost?
Think about your answer, then reveal below.
Model answer: Because resources (time, money, materials) are limited, choosing one use of a resource means giving up other possible uses. If resources were unlimited, all alternatives could be pursued simultaneously and nothing would need to be sacrificed.
Scarcity is the root of all tradeoffs. The moment a resource is finite, allocating it to one purpose forecloses others — and the value of the best foreclosed option is the opportunity cost. This is why opportunity cost is present in every economic decision, even non-monetary ones.