A local authority with a fixed budget of £40 million faces a choice between upgrading primary schools and constructing cycle lanes. Each school upgrade costs £5 million, and each mile of cycle lane costs £2 million. The authority decides to allocate £30 million of its budget to upgrade 6 schools and spends the remaining £10 million on cycle lanes.
What is the opportunity cost of the school upgrades to the local authority?
5 miles of cycle lanes
15 miles of cycle lanes
6 school upgrades
20 miles of cycle lanes
53 exam-style questions on OCR A Level Economics The economic problem. Each one has a worked solution and a mark scheme showing where the marks go.