📚 Learning Guide
Opportunity Cost and PPC
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If a country decides to allocate more resources to the production of consumer goods instead of capital goods, which of the following is the most likely consequence?

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Choose the Best Answer

A

A decrease in future production capacity due to underinvestment in capital goods.

B

An immediate increase in unemployment in the consumer goods sector.

C

A constant level of economic growth with no trade-offs.

D

A shift of the production possibilities curve outward.

Understanding the Answer

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Answer

When a country chooses to produce more consumer goods, like toys and clothes, instead of capital goods, such as machinery and tools, it faces an opportunity cost. This means that by focusing on consumer goods, the country gives up the chance to produce capital goods that could help improve its economy in the long run. For example, if a factory invests in making more toys today, it might not have the equipment needed to make those toys more efficiently tomorrow. As a result, while people may enjoy more consumer products now, the economy could grow slower in the future because it lacks the necessary tools and equipment to produce more goods overall. Therefore, balancing the production of both types of goods is important for sustainable growth.

Detailed Explanation

When a country focuses on making more consumer goods, it spends less on capital goods. Other options are incorrect because Some might think that making more consumer goods will cause job loss in that sector; It's a common mistake to think that focusing on one area won't affect others.

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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