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Test Prep For AP® Courses
Test Prep For AP® Courses
28.
A company decides to spend $500,000 on office renovations. What is one opportunity cost of this decision, from the perspective of the company?
- Worker happiness from the better work environment
- Fewer dividends to the company’s shareholders
- Forgone investment in new capital equipment for the company
- Rental fees for the office building
- Fees paid to the construction company that has been hired to complete the renovations
29.
A country can produce 10,000 more automobiles but doing so will require it to produce 5,000 fewer computers. The opportunity cost of producing one automobile in this example is therefore ____________.
- 10 automobiles
- 5 computers
- 2 computers
- ½ of a computer
- ½ of an automobile
30.
Consider the following production information for Country A.
| Point | Quantity of Automobiles | Quantity of Computers |
|---|---|---|
| A | 10 | 0 |
| B | 9 | 7 |
| C | 8 | 14 |
| D | 7 | 21 |
| E | 6 | 28 |
| F | 5 | 35 |
| G | 4 | 42 |
| H | 3 | 49 |
| I | 2 | 56 |
| J | 1 | 63 |
| K | 0 | 70 |
Table 2.2
- Using the information above, draw a Production Possibilities Frontier for Country A.
- Given the information in this table, what is the opportunity cost of one computer in terms of automobiles?
- Suppose another country, Country B, has an opportunity cost of one computer equal to three automobiles. Should Country A or B specialize in production of computers? Explain.
- Does the PPF you drew in part (a) exhibit increasing opportunity cost in the production of either computers or automobiles? Explain.