Let's solve each scenario on the
Opportunity Cost Worksheet step by step, identifying the
opportunity cost and providing a clear explanation.
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1. The Mayor of Springfield
Choice:
The mayor chooses to spend $50,000 on a new roof for the public library.
Opportunity Cost:
The opportunity cost is the
new comprehensive website for the town (or possibly the
bigger Fourth of July fireworks display, but since it was a toss-up between the roof and the website, the next best alternative is the website).
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✔ Best Answer: *The opportunity cost is the new comprehensive website for the town.*
Explanation:
The opportunity cost is the value of the next best alternative that is given up when making a decision. In this case, the mayor chose to fix the library roof to prevent damage, but the most valuable alternative he gave up was building a modern, useful website—something that could improve town services and communication. Since the decision was a close call between the roof and the website, the website represents the highest-valued forgone option.
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2. MegaToys Inc.
Choice:
MegaToys Inc. is considering shifting production from dinosaur toys to either robot or dog toys due to changing demand trends.
Opportunity Cost:
The opportunity cost is the
dinosaur toy production (specifically, the revenue and market presence lost by stopping production of the dinosaur toy).
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✔ Best Answer: *The opportunity cost is the continued production of the dinosaur toy.*
Explanation:
Opportunity cost refers to what must be given up when choosing one option over another. Although the company can now produce robot or dog toys, the cost of switching is the loss of producing the dinosaur toy—which has been profitable for 20 years. Even though the per-unit cost is low ($0.50), the company is giving up potential sales, brand loyalty, and existing demand for the dinosaur toy. Thus, the opportunity cost is the value of continuing to make and sell the dinosaur toy instead of shifting to the new products.
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✔ Final Answers:
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1.
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Choice: New roof for the public library
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Opportunity Cost: A new comprehensive website for the town
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Explanation: The opportunity cost is the website because it was the next best alternative the mayor gave up in favor of the library roof, representing the highest-valued forgone option.
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2.
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Choice: Shift production to robot or dog toys
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Opportunity Cost: Continued production of the dinosaur toy
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Explanation: The opportunity cost is the dinosaur toy production, as the company must give up making these toys—which have a history of demand and lower production costs—to focus on new products.
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This worksheet teaches that
opportunity cost is not just about money, but about the
value of the next best alternative that is sacrificed when a choice is made.
Parent Tip: Review the logic above to help your child master the concept of opportunity cost worksheet.
