📚 Learning Guide
Opportunity Cost Analysis
easy

If a country decides to produce more consumer goods, what is the most likely effect on its capital goods production?

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Choose the Best Answer

A

Capital goods production will decrease due to limited resources.

B

Capital goods production will increase to meet consumer demands.

C

Capital goods production will remain unchanged regardless of consumer goods output.

D

Capital goods production will temporarily stop until consumer goods are produced.

Understanding the Answer

Let's break down why this is correct

Answer

When a country chooses to produce more consumer goods, it often means that it will have to reduce the production of capital goods, which are items used to make other goods, like machinery or buildings. This is because resources such as labor, materials, and time are limited, so focusing on one type of production usually comes at the cost of another. For example, if a country decides to make more cars for people to buy, it might have to cut back on making machines that help build those cars. This trade-off illustrates the concept of opportunity cost, where the opportunity to invest in capital goods is lost in favor of more immediate consumer needs. Ultimately, while producing more consumer goods can boost short-term satisfaction, it may hurt future production capabilities if capital goods are neglected.

Detailed Explanation

When a country focuses on making more consumer goods, it uses resources like money and workers. Other options are incorrect because Some might think that making more consumer goods means we need more capital goods; It's a common mistake to believe that production levels don't affect each other.

Key Concepts

Opportunity Cost
Resource Allocation
Production Choices
Topic

Opportunity Cost Analysis

Difficulty

easy level question

Cognitive Level

understand

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