📚 Learning Guide
Opportunity Cost and PPC
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A country faces a trade-off between producing cars and computers. If it chooses to produce more cars, which statement best reflects the opportunity cost involved?

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Choose the Best Answer

A

The value of the cars produced is the opportunity cost.

B

The production of computers decreases as cars increase.

C

The value of the next best alternative, such as computers, is the opportunity cost.

D

There is no opportunity cost if more resources are allocated to cars.

Understanding the Answer

Let's break down why this is correct

Answer

When a country decides to produce more cars, the opportunity cost is what it gives up in order to make those cars. In this case, the country may have to reduce the number of computers it produces. This means that for every car made, fewer computers are available for sale or use. For example, if the country can make 100 cars or 200 computers, choosing to make 20 more cars might mean it can only produce 180 computers instead. So, the opportunity cost of making more cars is the computers that could have been produced instead.

Detailed Explanation

The opportunity cost is what you give up when you make a choice. Other options are incorrect because This answer confuses the cost of what is made with what is given up; This answer describes what happens but doesn't explain the cost of that choice.

Key Concepts

Opportunity Cost
Production Possibilities Curve (PPC)
Resource Allocation
Topic

Opportunity Cost and PPC

Difficulty

medium level question

Cognitive Level

understand

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