Questions and Answers
One method for studying opportunity cost is to think in terms of?
How does a production possibility chart assist in outlining opportunity cost?
It compares production numbers of one product to another.
Assessing opportunity cost involves?
Making choices and dealing with consequences.
Opportunity cost occurs because of a producer's need to?
Signup and view all the answers
On a production possibility curve, data points that fall outside of the curve represent?
Signup and view all the answers
Which of the following illustrates an opportunity cost?
Signup and view all the answers
What is a graphical representation of the combination of goods and services that can be produced in a situation?
Signup and view all the answers
In a scenario where a company makes $200,000 in a year and has $150,000 in production costs, what does the $200,000 represent?
Signup and view all the answers
Study Notes
Opportunity Cost Overview
- Opportunity cost is understood as the tradeoffs involved when making choices.
- It reflects the value of the next best alternative foregone when a decision is made.
Production Possibility Chart
- A production possibility chart compares the quantities of two different products that can be produced, illustrating opportunity costs.
- Data points outside the production possibility curve indicate unattainable production levels under current resource constraints.
Assessing Opportunity Cost
- Assessing opportunity cost requires making choices and understanding the consequences of those choices.
- This process highlights the necessity for producers to allocate resources effectively.
Opportunity Cost in Practice
- An example of opportunity cost is illustrated through Amir's dilemma of either studying or playing basketball, showcasing personal tradeoffs.
- Revenue is generated when a company earns $200,000 in a year, with production costs of $150,000, resulting in a profit of $50,000. The $200,000 indicates total revenue earned.
Graphical Representation
- The production possibility curve serves as a visual tool to represent the combinations of goods and services that can be produced given specific resource limitations.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Explore the concept of opportunity cost through these flashcards. Each card presents key ideas and definitions to enhance your understanding of tradeoffs, production possibilities, and decision-making. Perfect for students looking to grasp economic principles effectively.
