If a company decides to produce more units of good X at the expense of good Y, what is the underlying reason for this trade-off?

When a company chooses to produce more units of good X instead of good Y, it's making a decision based on opportunity cost. Opportunity cost is what the company gives up in order to make that choice; in this case, it's the amount of good Y that won't be produced. The company believes that producing more of good X will bring them more profit or benefits than producing good Y. For example, if a factory can make either 100 toys or 50 bicycles, choosing to make 100 toys means they forgo the chance to make those 50 bicycles. This trade-off shows how resources are limited, and companies must decide how to use them most effectively to achieve their goals.