Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The amount of consumer goods that could have been produced
B
The reduction in capital goods production
C
The total resources available in the economy
D
The increase in overall economic efficiency
Understanding the Answer
Let's break down why this is correct
Answer
When a country operates on its production possibility curve (PPC), it shows the maximum amount of goods it can produce with its available resources. If the country decides to allocate more resources to consumer goods, like food and clothing, instead of capital goods, such as machinery and tools, it is making a trade-off. The opportunity cost of this decision is the amount of capital goods that are not produced as a result. For example, if the country shifts resources and produces 100 more units of consumer goods, it might lose the ability to produce 50 units of capital goods. Therefore, the opportunity cost is the lost capital goods that could have helped the economy grow in the future.
Detailed Explanation
The opportunity cost is what you give up when you make a choice. Other options are incorrect because This option confuses the idea of what is lost; This choice suggests that the total resources are lost, but they are still there.
Key Concepts
Economic efficiency
Resource allocation.
Topic
Opportunity Cost and PPC
Difficulty
medium level question
Cognitive Level
understand
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