Scarcity, choices and opportunity cost

Grade 12 Social Studies Worksheet - Challenge Me

Circle the best answer.

1. Read this first

   Use this

   Card A, "The Marsh Road Bridge" (made up). A county has spent $40 million on a bridge. Finishing needs $20 million more. If finished, engineers estimate $28 million of benefits to drivers. If the work stops, the unfinished part can be sold for $5 million. Card B, "A council member" (made up). "We have already put $40 million in. If we stop now, that money is wasted." Card C, "The estimate" (made up). The engineers' best single guess of the benefit is $28 million. They say it could be anywhere from $15 million to $30 million.

2. 1.

   Ari reads cards A and B. Which comparison should the council use to decide whether to finish?

   • Stop: $40 million is already spent, which is more than the $28 million of benefit, so the project is a loss
   • Finish: spending $20 million more recovers part of the $40 million already spent on the bridge
   • Finish: $28 million of benefit less $20 million to come is +$8 million, against a $5 million sale
   • Stop: the total cost of $60 million is above the $28 million benefit, so finishing loses $32 million

3. Use this

   Card A, "The Marsh Road Bridge" (made up). A county has spent $40 million on a bridge. Finishing needs $20 million more and would give $28 million of benefits. If the work stops, the unfinished part can be sold for $5 million. Card D, "Another project" (made up). The same $20 million could instead pay for a new bus lane that would give $26 million of benefits.

4. 2.

   Jun adds card D to card A. Which statement about the best choice is supported?

   • Stopping and building the bus lane wins: $5 million of sale plus a $6 million gain beats the $8 million net
   • Stopping wins, since the bus lane's $26 million is $6 million above its $20 million cost
   • Nothing changes, since the $40 million already spent still decides the choice
   • Finishing still wins, because $28 million of benefit is more than the bus lane's $26 million, so a bridge nearly built should be kept

5. Use this

   Maya's trip to work (example figures, made up for practice). Columns: Option, Time, round trip, Money cost per day. Bus, 90 minutes, $6; Drive, 40 minutes, $14. Economists often count the time a trip takes as a cost, valued at what a person could earn or would pay to save it. People value their time differently.

6. 3.

   Maya values an hour of her time at $20. Kira compares the options. Which choice fits the table?

   • Either one: at $20 an hour the two options cost about the same each day
   • Drive: both options take the same time once she counts her $20 an hour of waiting time
   • Bus: it costs $6 against $14, which is $8 less each day, and the table shows no other cost
   • Drive: the 50 minutes saved are worth about $16.67 to her, above the extra $8 it costs
7. 4.

   Luz asks at what hourly value of time the bus and driving cost the same each day. Which answer fits?

   • About $9.60 an hour: below that the bus costs less overall, above it driving does
   • $8 an hour, the extra money that driving costs each day, since the options differ by $8
   • $12 an hour, the extra $8 spread over the 40 minutes of driving
   • $16 an hour, the extra $8 spread over half an hour of time saved
8. 5.

   Maya's friend Tomas values an hour at $9. Milo compares Tomas with Maya. Which statement is best supported?

   • At $9 an hour the bus costs about $19.50 a day and driving about $20, so Tomas slightly prefers the bus
   • The bus costs him $6 against $14, so it is cheaper whatever his time is worth
   • Tomas should drive too, since the table gives one right answer for each rider who makes this trip
   • Tomas is indifferent, since $9 is close enough to $9.60 that the two cost the same to him each day
9. 6.

   Noah looks for the missing fact that would most change the $9.60 break-even value. Which fact is it?

   • Whether Maya's wage is paid weekly or monthly, because that changes what her hour is worth to her each day
   • Whether the bus fare is paid in cash or by card, because that changes the money cost
   • How many riders share the bus on Maya's route, because crowding is a cost
   • Whether Maya can study or work on the bus, so the 90 minutes cost less than a full 90 minutes

10. Use this

    Card A, "Student parking permits" (made up). The school lot has 100 permits. 160 students want one. Three ways to hand them out: Price, $120 a permit; Lottery, free to enter, 100 names drawn at random; Line, free, the first 100 in line get one, and the line forms 3 hours before the office opens. Card B, "Rationing" (in our words). Rationing is deciding who gets a scarce good. A price gives it to those who are willing and able to pay. A lottery gives each applicant the same chance. A line gives it to those who give up the most time. Card C, "Two students" (made up). Marcus earns $15 an hour at a job. Dani has no job and values an hour of her time at about $3.

11. 7.

    Pia asks which method puts the biggest cost on students who give up wages by waiting. Which fits cards A to C?

    • The lottery, since entering costs the applicant's time and the winners are not known
    • No method, since a free permit has no cost to anyone who gets one
    • The price, since a $120 fee costs a worker earning $15 an hour eight hours of pay
    • The line, since 3 hours of waiting costs Marcus about $45 in earnings
12. 8.

    Ren compares Marcus and Dani on the price and the line. Which statement is best supported?

    • Both would rather enter the lottery, since a free draw costs neither of them any money or time
    • Both would rather wait in line than pay $120: the wait costs Marcus about $45 and Dani about $9
    • Marcus would rather pay, since waiting three hours costs him more than any fee could
    • Dani would rather pay, since her time is cheap and a $120 fee is worth paying
13. 9.

    A student says the lottery costs nothing because nobody pays. Tala tests the claim. What is the best reply?

    • Wrong: a lottery raises the cost of a permit to $120, the same as under the price method, for each winner
    • Right: a lottery is fair, and a fair method has no opportunity cost
    • It still has costs: applicants spend time entering, and 60 of 160 get no permit, whoever valued it most
    • Right: with no fee and no wait, a lottery puts no cost on anyone
14. 10.

    Zee must pick the claim that cards A to C cannot support. Which one is it?

    • A lottery gives each applicant the same chance, 100 in 160
    • A line gives permits to the students who give up the most time
    • A price gives permits to students who are willing and able to pay
    • A price gives the permits to the students who want them most