📚 Learning Guide
Opportunity Cost Analysis
hard

If a country decides to allocate more resources to consumer goods, it will not experience any opportunity costs if it is currently operating at full production capacity.

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Learning Path
Learning Path

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A

True

B

False

Understanding the Answer

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Answer

When a country is operating at full production capacity, it means all its resources are being used efficiently. If it decides to produce more consumer goods, it must take resources away from other areas, like capital goods or services. This shift creates an opportunity cost, which is the value of what is given up in order to produce the consumer goods. For example, if a country redirects steel from making cars to making refrigerators, the opportunity cost is the cars that are not produced. Thus, even at full capacity, there are always trade-offs and costs associated with choosing one option over another.

Detailed Explanation

When a country uses all its resources, choosing to make more consumer goods means giving up something else. Other options are incorrect because Some might think that using all resources means no costs.

Key Concepts

Opportunity Cost
Resource Allocation
Production Possibility Frontier
Topic

Opportunity Cost Analysis

Difficulty

hard level question

Cognitive Level

understand

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