1.
3 Opportunity cost
NO Question
1. 3 (a) Explain how the principle of opportunity cost might be relevant when a person chooses a
new job. [3]
0455 Nov.2007 Paper 4 Question 3 a
2. 2 A government decided to stop subsidising students when they went to university. This meant a
university course cost the students more but the government had extra funds.
(a) Define opportunity cost and explain how the above decision might be used to illustrate an
opportunity cost. [4]
0455 June 2010 Paper 21 Question 2 a
3. 2 All countries face the basic economic problem in relation to the factors of production. One
country might allocate more resources to education and health care than another, but there will
always be an opportunity cost involved in such decisions.
(c) Define opportunity cost and explain why it is an important concept for economists. [4]
0455 Nov 2011 Paper 22 Question 2 c
4. 2 (b) Define the concept of opportunity cost. [3]
(d) Discuss whether a country should conserve or use its natural resources. [8]
0455 June 2012 Paper 21 Question 2 b, d
5. 2 (b) Explain what is meant by the economic problem and why opportunity cost is relevant to the
allocation of resources. [6]
0455 Nov.2012 Paper 22 Question 2 b
6. 2 (c) Discuss why the concept of opportunity cost is important for (i) firms, (ii) consumers and (iii)
governments to consider when making choices. [10]
KANNAN NARAYANASAMY 1
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0455 Nov.2012 Paper 23 Question 2 c
7. 2 Production involves the use of the four factors of production. The use of these resources
involves an opportunity cost.
(b) Using a production possibility curve, explain what is meant by opportunity cost. [6]
0455 June 2013 Paper 22 Question 2 b
8. 2 Economic decisions involve an opportunity cost. This can clearly be seen in a production
possibility curve.
(a) Describe why economic decisions involve an opportunity cost. [4]
(b) Using a production possibility curve diagram, explain how it can show the concept of
opportunity cost. [6]
(c) Discuss the extent to which the concept of opportunity cost is only of use to governments. [10]
0455 Nov.2013 Paper 21 Question 2 a, b, c
9. 2 In 2012, the Indian Prime Minister announced that the Government was going to spend US$90
million on sending a spaceship to the planet Mars. Some economists argued that it would be
better to use the factors of production, such as land and labour, to improve education or to build
more roads.
(b) Explain the significance of opportunity cost for a government when making its spending
decisions. [4]
0455 Nov.2014 Paper 21 Question 2 b
10. 2 Factors of production, private and external costs and opportunity costs are all important
concepts in Economics.
(c) Explain why scarcity gives rise to an ‘opportunity cost’. [4]
(d) Discuss whether a decision to cut down trees for wood is an appropriate use of a scarce
resource. [8]
0455 Nov.2014 Paper 22 Question 2 c, d
11. 2 In 2013, an earthquake on the Iran/Pakistan border destroyed many factories and homes. Some
officials wanted the Governments to rebuild the factories and homes, even though there would
be an opportunity cost. Others suggested that some people should be encouraged to emigrate.
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(a) Define ‘opportunity cost’. [2]
0455 June 2015 Paper 21 Question 2 a
12. 2 Students have to consider the opportunity cost of going to university. University graduates
usually earn more than people who have not gone to university. Having more graduates
influences a country’s production possibility curve. Some economists suggest that students should
pay the full cost of their university courses and accommodation. Others say that the government
should pay some or all of the cost.
(a) Describe a possible opportunity cost of a student going to university. [2]
(b) Explain why university graduates usually earn more than people who have not gone to
university. [4]
0455 June Nov.2001 Paper 21 Question 2 a
13. 2 In 2009, the unemployment rate in Spain was 8% and the annual inflation rate was 3%. By April
2013, the unemployment rate had reached a record 27% but the annual inflation rate had fallen
to 2%. The resulting rise in government spending on unemployment benefits involved an
opportunity cost.
(b) Explain why government spending on unemployment benefits involves an opportunity cost.
[4]
0455 June 2015 Paper 23 Question 2 b
14. 2 In 2009, the unemployment rate in Spain was 8% and the annual inflation rate was 3%. By April
2013, the unemployment rate had reached a record 27% but the annual inflation rate had fallen
to 2%. The resulting rise in government spending on unemployment benefits involved an
opportunity cost.
(b) Explain why government spending on unemployment benefits involves an opportunity cost.
[4]
0455 Nov.2015 Paper 23 Question 2 b
15. 4 Increasing demand from China has made New Zealand the world’s biggest exporter of dairy
products. Its exports of milk to China increased by 45% in 2013. More than 300 000 hectares of
land in New Zealand have been transferred to dairy use from other forms of farming and forestry
use since 2000. The increase in milk production has caused the average cost of its production to
fall and changes in production methods have affected the price elasticity of supply of milk.
(a) Why may less wheat be the opportunity cost of producing more milk? [2]
0455 June 2016 Paper 21 Question 2 a
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16. 7 Many economists are predicting that relative poverty will increase whilst absolute poverty will
fall in both India and the United States of America. The level of poverty can be influenced by, for
example, education, the technology used and the number of new businesses created, including
sole proprietorships.
(b) Explain two different opportunity costs that may be involved in a person becoming a sole
proprietor. [4]
0455 June 2016 Paper 23 Question 7 b
17. 3 Rich people in some countries are now working for more hours on average than poor people.
One reason for this is thought to be that well-paid jobs provide more job satisfaction. Gaining
enjoyment from work can lead to high labour productivity.
(a) What is a possible opportunity cost of working? [2]
0455 Nov.2017 Paper 22 Question 3 a
18. 2 Swaziland is a small African country where six in ten people live in poverty and most firms are
small and use little capital equipment. In October 2015 it opened a new airport. Some economists
suggest that the building of the airport involved a high opportunity cost and caused a range of
external costs. The building of the airport is part of the government’s plan to turn the country
from a developing into a developed country.
(a) What may be the opportunity cost of building an airport? [2]
0455 June 2018 Paper 22 Question 2 a
19. 6 Botswana has a number of conservation projects. These are thought to provide a social benefit
to local communities. Botswana has a mixed economic system with tax revenue as a percentage
of GDP at 27% in 2017. Some Botswanan economists suggest that the country should move
towards a market economic system, taking care to avoid market failure.
(b) Explain two advantages of conserving natural resources. [4]
0455 March 2019 Paper 22 Question 6 b
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