.Microeconomics Assignement 1 1. a. Define opportunity cost, and explain its importance in economics. (3 marks)

Opportunity cost refers to what you must give up (trade off) to obtain some item. It represents the forgone opportunities. It is very important to all of us; it helps and guides our decisions in life. For every decision made, no matter the circumstances; work, school, business, life in general, we incurred a cost, the opportunity cost, what we must give up to obtain the chosen good. The opportunity cost of an item is the weight of another item from those that society have to trade off or give up in order to obtain it, that is the way that society allocates its scarce resources. ALSO, OPPORTUNITY COST IS VERY IMPORTANT FOR THE THEORY OF COMPARATIVE ADVANTAGE AND TRADE. -1 MARK. b. The province of British Columbia hosted the 2010 Olympic Games and invested millions of dollars in improvements to facilities for these events. How would one determine the opportunity cost of the 2010 Olympic Games? (4 marks)

The opportunity cost for BC to host the games could be determine by evaluating and comparing what the province could do with the funds (tax payers money) and time that it will invest in the games against, the benefits that could bring to the to the province if BC against the benefits that that money and time will create if invested differently. In one hand the province could add all the benefits that the games will bring to the province; benefits such as increase in tourism, sales, international exposure, etc. At the same time the benefits that infrastructure will bring to the province, such as new sports arenas, new show venues, creating a huge value to the province and to athletes in general. In the other hand the province could add all the benefits that the budgeted money could bring to the province if it was not use for the games, but use to other