Swaziland is a small African country where six in ten people live in poverty and most firms are small and use little capital equipment. In October 2015 it opened a new airport. Some economists suggest that the building of the airport involved a high opportunity cost and caused a range of external costs. The building of the airport is part of the government’s plan to turn the country from a developing into a developed country.

(a) What may be the opportunity cost of building an airport?

Explanation:

The opportunity cost is the cost that is foregone for building an airport. As the government spending is limited by investing in one plan means it has to forego the other plans. The societal decisions are affected with opportunity cost. Swaizland is a small country and the people's income are lower to afford to pay for air tickets and travel. So airport might be of less use to the country when compared to other essentials which government can spend on.

The cost of building an airport in this under developed city increases the opportunity cost. As the investment can be used towards investing in housing, industrial development, educational facilities etc.