Passage Two

Questions 26 to 30 are based on the following passage.

We have emphasized so far the significance of scarcity — the limited means to satisfy human wants. Because of scarcity, choices are necessary. An easy example of the problem of choice is a person\'s decision about how to allocate his or her time. As the old saying goes, “There are only 24 hours in a day.” If we take off 8 hours for a reasonable night\'s sleep, this leaves 16 hours to be allocated among all other possible things — working at one or more jobs, watching TV, studying, playing tennis, etc. — one can do with the limited available waking hours. Clearly, each person must make choices about how much of their limited available time will be spent on each possible activity.

When choices are made among alternatives such as those just described, it becomes plain that choosing one alternative often involves giving up another. For example, suppose you go to classes 4 hours a day and get 8 hours of sleep. You will have an additional 12 waking hours to allocate per day. Suppose now that the only other activities you view as worth pursuing are watching TV and studying. If you choose to watch TV for 12 hours a day, no time will be left for studying, assuming you continue to sleep for 8 hours in each 24-hour period and do not cut classes. If you choose each day to devote 6 hours to studying, only 6 of the 12 waking hours will be available for watching TV. You must give up the opportunity of watching more hours of TV in the process of choosing to study. We can therefore say that the decision to study costs you 6 hours of TV watching.

Economists use the term "opportunity cost" to mean the cost of a specific choice measured in terms of the next best alternative choice. In other words, it is what the decision maker must forego in order to make the choice that is finally made. Thus, in our example, the opportunity cost of studying for 6 hours was 6 hours of watching TV. We can see many other examples of opportunity costs around us. For example, governments are faced with limited budgets and therefore with limited resources that can be used to provide goods and services to citizens. If a government chooses to improve its military forces, it may well do so by allocating fewer resources for libraries or schools. The opportunity cost of a strong defense may be a reduction in the size of library holdings or educational services.

26. What is most probably the key point discussed immediately before this passage?

[A] Limited time. [B] Making choices.

[C] Opportunity cost. [D] The shortage of resources.

27. According to the passage, choices must be made because ______.

[A] resources are abundant

[B] there is too much for us to do

[C] there are only 24 waking hours in a day

[D] our means are limited, but our wants are unlimited

28. According to the passage, economists define "opportunity cost" as "_______".

[A] an opportunity given up in terms of cash

[B] the cost of a better choice measured in terms of cash :

[C] giving up a specific choice for the next best alternative

[D] the cost of a specific choice measured in terms of any alternative choice

29. In the examples cited in the passage, the opportunity cost of studying for 4 hours per day was_____.

[A] 4 hours of watching TV [B] 4 hours of classes

[C] 4 hours of sleep [D] 8 hours of sleep

30. If a government chooses to allocate more of its resources to its military forces, there is a possibility of reduction in resources allocated for _____.

[A] libraries and education [B] libraries and business firms

[C] education and business firms [D] libraries, business firms and education