Question

"The resources now going into the War on Terrorism and into improved airport security would save more lives if they were invested in medical research." This statement most clearly reflects which of the following?

	a.	selfishness; if people were not selfish, we could have more of everything.
	b.	The best test of an economic theory is its ability to predict.
	c.	The value of goods can be determined objectively.
	d.	There is no such thing as a free lunch--the use of scarce resources always has an opportunity cost.

Answer 1

The answer is d

As resources are limited and scarce so we can't have everything which we want, this is the reason why we make choice. As our resources are limited so we have to give up somethings if we want anything.

Opportunity cost : The benefit that is given up when an investor, individual or a firm chooses one alternative over another.

We spend resources on war instead of medical research even after knowing that the investment in the medical research could save even more number of lives. So, the amount of money/ resources on medical research is the opportunity cost of money spent on war.