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AP Microeconomics 1.5 Cost Benefit Analysis Questions

Evaluate choices by identifying forgone alternatives, combining explicit and implicit costs, calculating total net benefits, and choosing the option with the largest payoff.

Syllabus
Effective Fall 2022
Course
AP Microeconomics

Exam points

  • identify and calculate the next-best forgone alternative as opportunity cost
  • combine explicit spending and implicit forgone earnings into the economic cost of a choice
  • interpret rising opportunity cost when additional units require increasingly large sacrifices
  • calculate total benefit, total cost, and total net benefit from a scenario or table
  • select the quantity or activity level that maximizes total net benefit

Covered syllabus points

CBA-1.A—a. Define opportunity cost. b. Explain the opportunity costs associated with choices. c. Calculate the opportunity costs…CBA-1.B—a. Explain a decision by comparing total benefits and total costs (using a table or a graph when appropriate). b. Calculate total…

Question 1

[Maximum number: 2]

Nirali is a student at the University of Ainsley. She has 5 hours to study for two exams today. The tables below show Nirali's expected scores given the amount of time she studies for each exam.

Table for Question 1 — AP Microeconomics
Table for Question 1 — AP Microeconomics

Question (a)

(a)

Calculate Nirali's opportunity cost of the second hour spent studying history.

[ 1 ]

Question (b)

(b)

Assume Nirali increases the time she allocates to studying history. What happens to the opportunity cost of studying history? Explain.

[ 1 ]

Question 2

[Maximum number: 1]

The table below shows the total cost and total benefit of advertisements placed by AZY Foods, a firm in the retail food market.

Table for Question 2 — AP Microeconomics

Calculate the total net benefit of placing three advertisements. Show your work.

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