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Opportunity Cost Analysis
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Arrange the steps in the decision-making process of opportunity cost analysis when evaluating the production of consumer goods versus capital goods.

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Learning Path
Learning Path

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Choose the Best Answer

A

Identify the resources available for production → B. Assess the potential output of consumer goods → C. Analyze the next best alternative (capital goods) → D. Make a decision based on the highest value alternative

B

Assess the potential output of capital goods → A. Identify the resources available for production → C. Analyze the next best alternative (consumer goods) → D. Make a decision based on the lowest cost alternative

C

Make a decision based on the highest value alternative → A. Identify the resources available for production → B. Assess the potential output of consumer goods → D. Analyze the next best alternative (capital goods)

D

Analyze the next best alternative (consumer goods) → B. Assess the potential output of capital goods → A. Identify the resources available for production → C. Make a decision based on the highest value alternative

Understanding the Answer

Let's break down why this is correct

Answer

When evaluating the production of consumer goods versus capital goods, the decision-making process starts with identifying the options available. First, you need to understand what consumer goods, like toys or clothes, and capital goods, like machinery or tools, are and how they contribute to the economy. Next, you analyze the benefits of each option, considering what you gain from producing one over the other. For example, if a factory chooses to make more toys instead of machines, it may satisfy immediate consumer demand but lose the long-term benefits of increased production capacity. Finally, you weigh these benefits against the costs, helping you make a well-informed decision about which goods to produce.

Detailed Explanation

First, you need to know what resources you have. Other options are incorrect because This option starts with capital goods, which is not the right first step; This option jumps to making a decision too early.

Key Concepts

Opportunity Cost
Resource Allocation
Production Choices
Topic

Opportunity Cost Analysis

Difficulty

medium level question

Cognitive Level

understand

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