Question One (worth five points)

Give an example of something you could do, and that you would be quite good at, but the opportunity cost is too high. Give a brilliant example that will light up the room. Define opportunity cost.

Question Two (worth five points)

Give one example that illustrates how a manager of a company will make a better decision if the manager takes into account opportunity cost when deciding on how to use resources.

Question Three (worth five points)

We usually associate the cost of something going up as being bad days for the person facing the increase in cost. However, given how economists interpret the concept of costs, when costs go up it is good news for an individual.

Come up with a great example that illustrates this.

Question Four (worth ten points)

A cancer researcher is testifying in front of a Senate committee and the researcher makes the following assertion: "We should spend $20 billion on cancer researchwhen it comes to research that has the potential to save lives we shouldn't be worried about costs."Prepare the sort of a response an economist would make to this assertion. In your answer explain why an economist, concerned about saving lives, would want to focus on cost and what the economist understands by the concept of cost.