Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Opportunity costs only consider monetary expenses of a choice.
B
The value of the next best alternative is a key component in calculating opportunity costs.
C
Understanding opportunity costs can help in making better resource allocation decisions.
D
Opportunity costs are irrelevant when comparing goods produced in different countries.
E
Specializing in production can lead to a reduction in overall opportunity costs.
Understanding the Answer
Let's break down why this is correct
Answer
Opportunity costs refer to what you give up when you choose one option over another. In trade, this means considering what you miss out on by not choosing the next best alternative. For example, if a country decides to produce more cars instead of wheat, the opportunity cost is the amount of wheat it could have produced instead. This helps countries make better decisions about what to produce based on what they value more at that time. Understanding opportunity costs is crucial for effective trade because it allows countries to maximize their resources and benefits.
Detailed Explanation
Other options are incorrect because This idea suggests that only money matters when making choices; This statement misses the point that opportunity costs are about what you give up.
Key Concepts
Opportunity Costs
Comparative Advantage
Resource Allocation
Topic
Calculating Opportunity Costs
Difficulty
medium level question
Cognitive Level
understand
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