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3. You have a free evening, and your friends give you a choice between 3 options: 1) Going to Isaacs Bar and Grill 2) Watching The Rocky Horror Picture Show on DVD 3) Kite surfing You absolutely hate Isaacs, but enjoy the other two activities. What is your opportunity cost of kite surfing? (A) Your pleasure from watching Rocky Horro (B) Your pleasure from going to Isaacs (C) Your combined pleasured from the pub and watching Rocky Horror (D) None of the aboveClearly explain why .

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3)

The correct answer is (a) Your pleasure from watching Rocky horror

Opportunity cost is the value or utility from the next best option you sacrificed in order to take the option or choice you have chosen. Here Peter chooses Kite surfing and it is given in the question Peter hates Isaac bar and enjoys watching The Rocky Horror. Hence his next best alternative is watching the Rocky Horror. Hence His opportunity cost of Kite surfing is the pleasure from watching the Rocky Horror.

Hence the correct answer is (a) Your pleasure from watching the Rocky Horror.

4)

The correct answer is (c) Using the same resources to produce more cars and less cocaines

PPF shows all combination of goods that one can produce with given resources and technology.

PPF will shift If there is change in technology, increase in amount of resources or because of some trade( or specialization). Note that trade will result in change in opportunity cost and hence for any amount of cocaine there can be new amount of cars and hence will result in Shift in PPF. Hence Option (a) , (b) and (c) satisfied the conditions of shift in PPF but (c) does not. Details in option (c) will result in just change of Points on same PPF.

Hence the correct answer is (c) Using the same resources to produce more cars and less cocaines

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