Opportunity Cost Quiz 08252011

Today we had a pop quiz where you were asked about Opportunity Costs relating to taking this AP Economics class.

Opportunity Cost - the amount of other products that must be forgone or sacrificed to produce a unit of product

Most students understood that opportunity costs are what you must give up in order to achieve a unit of product (i.e. taking this class), but some listed only benefits of taking the class.  Popular and correct ideas that students listed included time for studying, materials, money, taking other elective classes, and putting one's GPA at risk because of the rigorous class material.  In theory there are infinite opportunity costs associated with taking this class, but students generally listed the ones that are most relevant to them.

Opportunity costs are important when examining production possibilities graphs (see pg. 26).  In that graph, industrial robots and pizza production are examined.  The graph shows that opportunity costs are measured in real terms, that is, in actual goods rather than in money terms.  Producing 9000 robots instead of 10000 means we can make 1000 pizzas instead of zero.