A municipal government has a fixed, non-divisible budget of £10 million\text{£}10\text{ million}£10 million to allocate to a single local development project. It faces three mutually exclusive proposals, each requiring the full £10 million\text{£}10\text{ million}£10 million:
If the government decides to allocate the budget to Proposal Gamma, what is the opportunity cost of this decision?
The £10 million\text{£}10\text{ million}£10 million financial expenditure required to fund Proposal Gamma.
The £25 million\text{£}25\text{ million}£25 million combined social benefit of both Proposal Alpha and Proposal Beta.
The £14 million\text{£}14\text{ million}£14 million social benefit of Proposal Alpha, which was the next best alternative.
The £2 million\text{£}2\text{ million}£2 million net social benefit surplus gained by choosing Gamma over Alpha.
123 exam-style questions on AQA A Level Economics 1.1 Economic methodology and the economic problem, covering 1.1.1 Economic methodology, 1.1.2 The nature and purpose of economic activity, 1.1.3 Economic resources, 1.1.4 Scarcity, choice and the allocation of resources, and 1.1.5 Production possibility diagrams. Each one has a worked solution and a mark scheme showing where the marks go.