Opportunity Cost Practice Questions — JAMB UTME

Question 1Question →

Ada has ₦5,000 and must choose between buying a set of past examination questions or a new school bag, both priced at ₦5,000. If she decides to purchase the past examination questions, what is the opportunity cost of her decision?

The ₦5,000 cash paid for the examination questions

The school bag foregone

The combined value of both the examination questions and the school bag

An outward shift of her production possibility frontier

Show answer & explanation

Answer: The school bag foregone

Answer

The school bag foregone

Opportunity cost (or real cost) refers to the next best alternative foregone when a choice is made under conditions of scarcity. In this scenario, purchasing the past examination questions means Ada must give up the school bag. Therefore, the school bag represents the opportunity cost of her decision.

Step-by-Step Solution

1

Identify the options available and the decision taken

Ada chose the set of past examination questions over the school bag.

Determining opportunity cost requires evaluating the selected choice against the alternative available.

2

Determine the alternative that was sacrificed

The sacrificed alternative is the school bag.

Opportunity cost is defined as the real commodity or opportunity foregone when a choice is made.

Key Concept

Opportunity Cost

Estimated Time:45s

Question 2Question →

The table below shows the Production Possibility Schedule for an agricultural firm in Enugu producing Palm Oil and Rice using a fixed set of resources:

Combination	Palm Oil (tons)	Rice (tons)
P	0	100
Q	20	90
R	35	70
S	45	40
T	50	0

If the firm reallocates its resources to move production from Combination R to Combination S, what is the opportunity cost per additional ton of Palm Oil produced, and what underlying economic process does this movement represent?

3

tons of Rice, representing a trade-off via reallocation of existing resources along the curve

30

tons of Rice, representing an outward shift of the Production Possibility Curve due to technological growth

The monetary expenditure required to harvest

10

additional tons of Palm Oil

10

tons of Palm Oil, representing an inward shift of the Production Possibility Curve

Show answer & explanation

Answer: $3$ tons of Rice, representing a trade-off via reallocation of existing resources along the curve

Answer

The opportunity cost is

3

tons of Rice per additional ton of Palm Oil, representing a trade-off via reallocation of existing resources along the curve.

The correct answer accurately calculates the marginal opportunity cost (

30

tons of Rice sacrificed divided by

10

tons of Palm Oil gained =

3

tons of Rice per ton of Palm Oil) and correctly identifies that choosing a different production combination using a fixed resource base constitutes movement along the Production Possibility Curve.

Step-by-Step Solution

1

Calculate the gain in Palm Oil output when moving from Combination R to Combination S

Gain in Palm Oil =

45 - 35 = 10

tons

To find the additional units of Palm Oil produced.

2

Calculate the total sacrifice of Rice output when moving from Combination R to Combination S

Sacrifice of Rice =

70 - 40 = 30

tons

Opportunity cost is defined by the foregone alternative output.

3

Compute the unit opportunity cost of Palm Oil

Unit Opportunity Cost =

\frac{30\text{ tons of Rice}}{10\text{ tons of Palm Oil}} = 3

tons of Rice

Dividing the sacrificed good by the gained good yields the marginal opportunity cost per unit.

4

Determine the economic interpretation of the movement

Movement along the existing Production Possibility Curve (PPC)

Reallocating fully employed, fixed resources between two goods results in movement along the PPC, not a shift of the curve.

Key Concept

Opportunity Cost and Movement along the Production Possibility Curve

Question 3Question →

A commercial farm in Kaduna operates with fixed total resources of $10$ hectares of arable land and $120$ worker-hours of labor per day. Producing $1$ ton of maize requires $1$ hectare of land and $12$ worker-hours of labor. Producing $1$ ton of yams requires $0.5$ hectares of land and $20$ worker-hours of labor. Initially, the farm devotes all its resources to maximize maize production, harvesting $10$ tons of maize per day. If the farm owner decides to reallocate resources to produce $3$ tons of yams per day, what is the opportunity cost of this decision expressed in tons of maize foregone?

Show answer & explanation

Answer: 5

Answer

The opportunity cost of producing 3 tons of yams is 5 tons of maize.

Producing 3 tons of yams absorbs 60 worker-hours out of the total 120 worker-hours available. The remaining 60 worker-hours can only produce 5 tons of maize. Since initial maize production was 10 tons, the farm gives up 5 tons of maize (10 - 5 = 5 tons).

Step-by-Step Solution

1

Calculate resources consumed by the production of 3 tons of yams.

Land consumed =

3 \times 0.5 = 1.5

hectares. Labor consumed =

3 \times 20 = 60

worker-hours.

Opportunity cost depends on the amount of productive inputs diverted away from maize production.

2

Determine the remaining inputs available for maize production.

Remaining land =

10 - 1.5 = 8.5

hectares. Remaining labor =

120 - 60 = 60

worker-hours.

Maize can only be produced using the unallocated land and labor inputs.

3

Identify the binding constraint for maize output.

Labor restricts maize output to

\frac{60}{12} = 5

tons (since land would permit

8.5

tons). Thus, maximum feasible maize output is

5

tons.

Production is restricted by the scarcest resource (labor).

4

Subtract the new maximum maize output from the initial maize output to find the opportunity cost.

10 \text{ tons} - 5 \text{ tons} = 5 \text{ tons of maize foregone}

.

Opportunity cost is defined as the quantity of the alternative good given up.

Key Concept

Opportunity cost with constrained multi-resource allocation

Question 4Question →

A commercial farming enterprise in Oyo State uses its fixed land and labor resources to produce Cassava and Yam. The table below presents its monthly production possibility schedule:

Combination	Cassava (bags)	Yam (bags)
P	120	0
Q	90	45
R	50	80
S	0	100

What is the opportunity cost of increasing Yam production from $45$ bags to $80$ bags, expressed in bags of Cassava foregone?

Show answer & explanation

Answer: 40

Answer

The opportunity cost of increasing Yam production from 45 bags to 80 bags is 40 bags of Cassava.

Increasing Yam production from

45

bags to

80

bags requires moving from Combination Q to Combination R. At Combination Q, Cassava production is

90

bags, whereas at Combination R, Cassava production decreases to

50

bags. The opportunity cost is the foregone Cassava production, calculated as

90 - 50 = 40

bags of Cassava.

Step-by-Step Solution

1

Locate the initial production combination

At Combination Q, the firm produces 45 bags of Yam and 90 bags of Cassava.

Opportunity cost measures what must be sacrificed when shifting resources from one alternative to another.

2

Locate the target production combination

At Combination R, the firm produces 80 bags of Yam and 50 bags of Cassava.

Increasing Yam production from 45 to 80 bags requires moving along the schedule from Q to R.

3

Calculate the quantity of the sacrificed commodity (Cassava)

Opportunity Cost = 90 - 50 = 40 bags of Cassava.

The opportunity cost is the explicit quantity of Cassava sacrificed to gain the additional 35 bags of Yam.

Key Concept

Opportunity Cost from Production Schedule

Question 5Question →

Kemi, a fashion designer in Ogun State, earns $₦80,000$ monthly from her tailoring shop. She decides to close her shop for one month to attend an advanced design training program. The program tuition is $₦50,000$ and training materials cost $₦20,000$ . What is the opportunity cost of Kemi's decision to attend the training program?

The

₦80,000

income foregone from her tailoring shop

The

₦70,000

total money spent on tuition and materials

The total sum of

₦150,000

combining fees and foregone income

The

₦10,000

net difference between her shop income and total program expenses

Show answer & explanation

Answer: The $₦80,000$ income foregone from her tailoring shop

Answer

The

₦80,000

income foregone from her tailoring shop

Opportunity cost is defined as the alternative sacrificed when an economic decision is made. By choosing to attend the workshop, Kemi foregoes the

₦80,000

she would have earned from operating her tailoring shop for that month.

Step-by-Step Solution

1

Identify the economic choice made and the alternative sacrificed

Kemi chose to attend the training program instead of operating her tailoring shop for the month.

Opportunity cost is defined as the real cost or next best alternative foregone when a choice is made.

2

Distinguish opportunity cost from money cost

Money cost is the actual financial payment (

₦50,000 + ₦20,000 = ₦70,000

), while opportunity cost is the yield of the sacrificed alternative (

₦80,000

shop income).

Economic analysis separates real sacrifice (income foregone) from explicit monetary outlays.

Key Concept

Opportunity Cost vs. Money Cost

Estimated Time:1m 15s

Question 6Question →

The table below presents the monthly Production Possibility Schedule for a manufacturing firm in Aba producing Leather Shoes and Leather Bags using a fixed quantity of labor and raw materials:

Production Combination	Leather Shoes (hundreds of pairs)	Leather Bags (hundreds of units)
P	$0$	$150$
Q	$20$	$140$
R	$40$	$120$
S	$60$	$90$
T	$80$	$50$
U	$100$	$0$

If the plant is currently producing at Combination Q ( $20$ hundred pairs of shoes and $140$ hundred bags) and reallocates its resources to increase shoe production to Combination T ( $80$ hundred pairs of shoes), what is the average opportunity cost of producing ONE additional pair of Leather Shoes over this range? Express your answer in units of Leather Bags foregone.

Show answer & explanation

Answer: 1.5

Answer

1.5 bags foregone per additional pair of shoes

Opportunity cost measures the sacrifice of one good required to obtain an additional quantity of another good. Moving from Combination Q to Combination T increases shoe production by 60 hundred pairs (from 20 to 80 hundred pairs) while reducing bag production by 90 hundred units (from 140 to 50 hundred units). The opportunity cost per additional pair of shoes is calculated as 90 hundred bags divided by 60 hundred pairs of shoes, yielding exactly 1.5 bags foregone per pair of shoes.

Step-by-Step Solution

1

Determine initial production at Combination Q

Shoes =

20

hundred pairs (

2,000

pairs), Bags =

140

hundred units (

14,000

bags)

Establishes the baseline output before resource reallocation.

2

Determine final production at Combination T

Shoes =

80

hundred pairs (

8,000

pairs), Bags =

50

hundred units (

5,000

bags)

Identifies the new production level after expanding shoe production.

3

Calculate the net gain in shoe production and net loss in bag production

Additional shoes =

80 - 20 = 60

hundred pairs; Bags foregone =

140 - 50 = 90

hundred bags

Opportunity cost evaluates the sacrifice required to gain additional units of the preferred good.

4

Calculate the unit opportunity cost

Opportunity cost per shoe pair =

\frac{90\text{ hundred bags}}{60\text{ hundred pairs}} = 1.5\text{ bags}

Divides the total quantity of the sacrificed good by the total gain of the produced good to get per-unit real cost.

Key Concept

Opportunity Cost / Marginal Rate of Transformation

Question 7Question →

A software engineer in Lagos currently earns a salary of $₦500,000$ per month. She is considering quitting her job for one year to pursue one of two mutually exclusive opportunities:

- Opportunity X: Establish an independent tech startup requiring an initial capital investment of $₦3,000,000$ , which she must withdraw from her fixed deposit account currently yielding $12\%$ per annum interest. The startup is expected to generate $₦15,000,000$ in total revenue over the year, with total operating expenses (office rent, server infrastructure, and wages) amounting to $₦6,500,000$ .
- Opportunity Y: Work as an overseas remote contractor earning a net salary of $₦900,000$ per month with zero capital investment required.

Calculate, in Naira ( $₦$ ), the economic opportunity cost of choosing Opportunity X for the year.

Show answer & explanation

Answer: 11160000

Answer

The economic opportunity cost of choosing Opportunity X for the year is ₦11,160,000.

The economic opportunity cost of an action is defined as the total benefit of the next best alternative foregone. By choosing Opportunity X, the software engineer gives up Opportunity Y (worth ₦900,000 × 12 = ₦10,800,000) as well as the interest her ₦3,000,000 capital would have earned in the fixed deposit account (12% of ₦3,000,000 = ₦360,000). Together, the total sacrificed value of this highest-ranked foregone package equals ₦10,800,000 + ₦360,000 = ₦11,160,000.

Step-by-Step Solution

1

Calculate the annual income of all alternative employment options available during the year.

Current Job annual income = ₦500,000 × 12 = ₦6,000,000. Opportunity Y annual income = ₦900,000 × 12 = ₦10,800,000.

Opportunity cost evaluates the sacrifice made regarding alternative choices foregone.

2

Calculate the foregone interest earned if funds remain in the fixed deposit account.

Foregone annual interest = 12% of ₦3,000,000 = ₦360,000.

Selecting Opportunity Y or retaining her current job would leave the ₦3,000,000 intact in savings, earning 12% interest.

3

Determine the net value of the single best foregone alternative option.

Value of Next Best Alternative (Opportunity Y + Savings Interest) = ₦10,800,000 + ₦360,000 = ₦11,160,000.

Economic opportunity cost is defined as the total value of the highest-valued alternative option foregone.

Key Concept

Opportunity Cost as the Next Best Alternative Foregone

Estimated Time:3m 0s

Question 8Question →

Tunde has $₦50,000$ saved and must choose between buying a laptop needed for an online coding course and buying a smartphone for personal entertainment. If Tunde decides to purchase the laptop, what is the opportunity cost of his decision?

The smartphone foregone

The

₦50,000

cash spent on the laptop

An outward shift in Tunde's production possibility curve

The total combined value of both the laptop and the smartphone

Show answer & explanation

Answer: The smartphone foregone

Answer

The smartphone foregone

Opportunity cost, also known as real cost, refers to the next best alternative foregone when a choice is made under conditions of scarcity. By choosing to purchase the laptop, the satisfaction derived from the smartphone is sacrificed, making the smartphone foregone the opportunity cost.

Step-by-Step Solution

1

Identify the choice made and the sacrificed alternative

Tunde selected the laptop, leaving the smartphone as the unchosen option.

Opportunity cost measures the sacrifice incurred by choosing one item over another.

2

Distinguish real cost from money cost

The real cost is the smartphone given up, while the

₦50,000

is the monetary expense.

In economics, opportunity cost is expressed in terms of goods/services foregone rather than money spent.

Key Concept

Opportunity Cost

Question 9Question →

An entrepreneur in Port Harcourt has sufficient capital to establish either a palm oil refinery or a commercial fish farm. If he chooses to invest in the palm oil refinery, what is the opportunity cost of his decision?

The expected financial profit generated from operating the palm oil refinery

The return and benefits foregone from not establishing the commercial fish farm

The total amount of money spent on purchasing equipment for the palm oil refinery

The combined operational costs of both the palm oil refinery and the fish farm

Show answer & explanation

Answer: The return and benefits foregone from not establishing the commercial fish farm

Answer

The return and benefits foregone from not establishing the commercial fish farm.

Opportunity cost (or real cost) refers to the next best alternative foregone when an economic decision is made. By allocating capital to the palm oil refinery, the entrepreneur sacrifices the potential returns from the commercial fish farm.

Step-by-Step Solution

1

Identify the choices available to the decision-maker.

The entrepreneur must choose between Option 1 (palm oil refinery) and Option 2 (commercial fish farm).

Opportunity cost arises only when scarcity forces a choice between alternative courses of action.

2

Identify the selected choice and the sacrificed alternative.

The selected choice is the palm oil refinery, leaving the commercial fish farm as the sacrificed alternative.

Opportunity cost is measured by the value of the next best alternative that is given up.

3

Formulate the definition of opportunity cost for this context.

The opportunity cost is the yield or profit foregone from the commercial fish farm.

Real cost in economics is expressed in terms of goods, services, or benefits foregone, not monetary expenditure.

Key Concept

Opportunity Cost

Estimated Time:45s

Question 10Question →

A manufacturing firm in Ibadan operates along its Production Possibility Curve (PPC) producing two goods: garments and shoes. Currently, when producing $150$ pairs of shoes, the firm can produce $400$ units of garments. To meet increased market demand for footwear, the firm reallocates its resources to produce $250$ pairs of shoes, causing garment output to fall to $150$ units.

Calculate the opportunity cost of producing one additional pair of shoes in terms of garments foregone.

Show answer & explanation

Answer: 2.5

Answer

The opportunity cost of producing one additional pair of shoes is

2.5

garments.

Opportunity cost along a Production Possibility Curve measures the amount of one commodity that must be sacrificed to obtain an extra unit of another. Producing

100

additional pairs of shoes requires giving up

250

units of garments. Therefore, the opportunity cost per additional pair of shoes is

\frac{250}{100} = 2.5

garments.

Step-by-Step Solution

1

Find the change in the production of shoes

\Delta \text{Shoes} = 250 - 150 = 100

pairs of shoes

To determine the gain in shoe output.

2

Find the quantity of garments sacrificed

\Delta \text{Garments} = 400 - 150 = 250

units of garments

To determine the total sacrifice in garment production.

3

Divide the sacrificed garments by the additional shoes gained

\frac{250}{100} = 2.5$ garments per pair of shoes

Opportunity cost per unit of shoes is the ratio of foregone garments to gained shoes.

Key Concept

Opportunity Cost on a Production Possibility Curve (PPC)

Question 11Question →

A commercial farmer in Jos allocates all available agricultural resources to cultivate either Irish potatoes or maize. Using all resources for potatoes yields $100\text{ tonnes}$ of potatoes, while using all resources for maize yields $150\text{ tonnes}$ of maize. Assuming a constant rate of substitution along the production boundary, what is the opportunity cost of producing $1\text{ tonne}$ of potatoes in terms of tonnes of maize?

Show answer & explanation

Answer: 1.5

Answer

The opportunity cost of producing

1\text{ tonne}

of potatoes is

1.5\text{ tonnes}

of maize.

Producing

100\text{ tonnes}

of potatoes requires foregoing

150\text{ tonnes}

of maize. The opportunity cost per tonne of potatoes is the amount of maize sacrificed per unit of potato gained, calculated as

\frac{150\text{ tonnes of maize}}{100\text{ tonnes of potatoes}} = 1.5\text{ tonnes of maize}

.

Step-by-Step Solution

1

Determine maximum production output for both alternative crops under full resource utilization.

Maximum potato capacity =

100\text{ tonnes}

; maximum maize capacity =

150\text{ tonnes}

.

This establishes the production possibility boundary.

2

Apply the opportunity cost formula:

\text{Opportunity Cost of Good A} = \frac{\text{Quantity of Good B Foregone}}{\text{Quantity of Good A Gained}}

.

\text{Opportunity Cost} = \frac{150\text{ tonnes of maize}}{100\text{ tonnes of potatoes}} = 1.5\text{ tonnes of maize}

.

Opportunity cost quantifies the real alternative sacrifice required per unit of the chosen output.

Key Concept

Opportunity Cost

Question 12Question →

A bakery in Benin City allocates its daily supply of flour to produce either 100 loaves of bread or 50 meat pies. Currently, the bakery produces 20 meat pies. If the baker decides to increase meat pie production to 35 meat pies, what is the opportunity cost of this decision in terms of loaves of bread foregone?

Show answer & explanation

Answer: 30

Answer

The opportunity cost of producing 15 additional meat pies is 30 loaves of bread foregone.

Opportunity cost measures the quantity of one good foregone to produce additional units of another good. Here, each meat pie requires giving up 2 loaves of bread (

100 \div 50 = 2

). Increasing pie production by 15 units (from 20 to 35) requires giving up

15 \times 2 = 30

loaves of bread.

Step-by-Step Solution

1

Determine the opportunity cost per unit of meat pie

1 meat pie = 2 loaves of bread (100 ÷ 50)

Establishing the rate of transformation between bread and meat pies based on resource allocation.

2

Calculate the increase in meat pie production

35 - 20 = 15 meat pies

Finding the marginal increase in output of the chosen item.

3

Calculate the total loaves of bread foregone

15 × 2 = 30 loaves of bread

Multiplying the additional meat pies produced by the unit opportunity cost in terms of bread.

Key Concept

Opportunity Cost in Production Trade-offs

Opportunity Cost

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Answer

Step-by-Step Solution

Key Concept

Common Mistakes