Lesson 2.8.1

2.8.1 Opportunity cost Quiz: OCR Business, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 2.8.1, Opportunity cost: 20 multiple choice questions for the OCR Business (H431), Unit 2: Business objectives and strategy, written with Revision Ninja.

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The 20 questions

  1. Which phrase best defines the term opportunity cost in business decision making?

    • Total financial expenditure
    • Next best alternative
    • Sunk capital expenditure
    • Potential future revenue

  2. What does opportunity cost measure when a firm chooses between mutually exclusive projects?

    • The forgone benefit
    • The total profit
    • The initial outlay
    • The sunk cost

  3. Which fundamental economic problem directly gives rise to opportunity cost in business?

    • Price deflation
    • Market saturation
    • Resource scarcity
    • Excess supply

  4. A business spends £100,000 on advertising instead of new product development. What is the opportunity cost?

    • Product development benefits
    • The £100,000 cost
    • Future tax liability
    • Advertising expenditure

  5. A firm uses retained profit to repay debt rather than expand factories. What is the opportunity cost?

    • Shareholder dividends
    • Factory expansion
    • Debt repayment
    • Interest paid

  6. A manager spends five hours writing a report instead of training staff. What is the opportunity cost?

    • The report written
    • Five hours wages
    • Staff training time
    • Management salary

  7. Project A yields £30,000 profit and Project B yields £50,000. If Project A is chosen, what is the opportunity cost?

    • £20,000 difference
    • £50,000 profit
    • £30,000 profit
    • £80,000 total

  8. Why are sunk costs excluded when evaluating the opportunity cost of a strategic choice?

    • They vary monthly
    • They are flexible
    • They are unrecoverable
    • They create profit

  9. How does high market uncertainty affect a business calculating the opportunity cost of investment?

    • Costs become zero
    • Forecasts become unreliable
    • Profit is guaranteed
    • Alternatives are eliminated

  10. A firm uses its premises for retail rather than letting them out for £20,000 annually. What is the opportunity cost?

    • Retail sales profit
    • £20,000 rental income
    • Building maintenance cost
    • Premises purchase price

  11. A farmer uses ten hectares of land to grow wheat instead of barley. What is the opportunity cost?

    • Total land value
    • Barley crop yield
    • Fertilizer costs
    • Wheat selling price

  12. Which financial statement fails to record opportunity cost because it lacks a cash transaction?

    • Decision tree
    • Risk assessment
    • Income statement
    • Investment appraisal

  13. How do explicit costs differ fundamentally from opportunity costs in business analysis?

    • Involve monetary payments
    • Involve lost benefits
    • Are always non-financial
    • Involve zero calculation

  14. How does a decision tree implicitly incorporate opportunity cost when comparing decision branches?

    • Comparing expected values
    • Ignoring low probabilities
    • Subtracting sunk costs
    • Maximising fixed costs

  15. An entrepreneur leaves a £40,000 salary job to start a firm making £35,000 profit. What is the economic profit?

    • £40,000
    • £75,000
    • £35,000
    • -£5,000

  16. Which process allows businesses to identify alternative strategies and minimise decision risks?

    • Debt factoring
    • Asset stripping
    • Contingency planning
    • Variance analysis

  17. A firm holds £100,000 liquid cash for emergencies rather than earning 5% interest annually. What is the annual opportunity cost?

    • £105,000 total
    • £500 interest
    • £100,000 cash
    • £5,000 interest

  18. Why do non-profit organisations focus heavily on social opportunity cost during decision making?

    • Capital is unlimited
    • Objectives are non-financial
    • Profit is maximised
    • Costs are zero

  19. A business buys automated machinery instead of hiring three production workers. What is the opportunity cost?

    • Energy running costs
    • Flexible workforce benefits
    • Machine purchase price
    • Maintenance expenses

  20. How does a longer time horizon generally impact the opportunity cost of a strategic decision?

    • Eliminates all risk
    • Increases potential trade-offs
    • Prevents future choices
    • Reduces initial capital

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