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Zorluk: Çok zorDefinition and Scope of Economics

A cocoa farming cooperative in Ondo State receives an agricultural development grant of ₦5,000,000\text{₦}5,000,000. The cooperative board evaluates two mutually exclusive projects: Option 1 is installing an automated processing plant estimated to generate ₦7,500,000\text{₦}7,500,000 in additional future revenue; Option 2 is constructing an irrigation canal system estimated to generate ₦6,800,000\text{₦}6,800,000 in additional future revenue. According to Lionel Robbins' definition of economics regarding scarcity and alternative uses, what constitutes the true economic cost of choosing to construct the irrigation canal system?

  1. A
    The ₦5,000,000\text{₦}5,000,000 monetary outlay required to purchase materials and construct the irrigation canal system.
  2. The foregone ₦7,500,000\text{₦}7,500,000 additional revenue from the automated processing plant, representing the real alternative sacrifice made.Cevap
  3. C
    The net financial gain of ₦1,800,000\text{₦}1,800,000 expected from the irrigation canal system after accounting for the initial grant.
  4. D
    An inward shift of the cooperative's production possibility curve resulting from funding allocation.

Cevap

The foregone ₦7,500,000\text{₦}7,500,000 additional revenue from the automated processing plant, which represents the next best alternative foregone (opportunity cost) when opting to construct the irrigation canal system.
Under Lord Lionel Robbins' formal definition, economics examines how rational agents allocate scarce means among competing ends. When two options are mutually exclusive, the true economic cost (opportunity cost) of selecting one project is the value of the next best alternative sacrificed. Choosing the irrigation canal means giving up the automated processing plant, which would have generated ₦7,500,000\text{₦}7,500,000 in additional revenue.

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1
Analyze the core premise of economics according to Lionel Robbins.
Robbins defines economics as the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.
Economic evaluation requires measuring decisions in terms of real alternative sacrifices rather than mere financial expenditures.
2
Identify the mutually exclusive options and their respective returns.
Option 1 yields ₦7,500,000\text{₦}7,500,000; Option 2 yields ₦6,800,000\text{₦}6,800,000. Selecting Option 2 means Option 1 must be sacrificed.
Opportunity cost is defined strictly as the value of the next best alternative foregone.
3
Differentiate opportunity cost from money cost and accounting profit.
The money cost is ₦5,000,000\text{₦}5,000,000, but the real economic opportunity cost of choosing the irrigation canal is the sacrificed return of ₦7,500,000\text{₦}7,500,000 from the automated processing plant.
True economic evaluation measures scarcity by comparing sacrificed returns from alternative uses of resources.

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Opportunity Cost and the Scope of Economics
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Definition and Scope of Economics

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