Practice Questions
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What does the concept of opportunity cost imply when calculating profit in a scenario where one must choose between two production options, considering comparative advantage?
Opportunity cost shows what you give up when you choose one option over another. Other options are incorrect because This answer suggests that all cos...
In a cost-benefit analysis, which of the following best describes the concept of opportunity cost when deciding to invest in a new business venture?
Opportunity cost is what you give up when you choose one option over another. Other options are incorrect because Some might think opportunity cost is...
If a business owner decides to invest $10,000 in a new machine instead of using that money to expand their marketing efforts, what is the opportunity cost of this decision?
Opportunity cost is what you give up when you make a choice. Other options are incorrect because Some might think the machine's price is the cost; Thi...
In the context of calculating profit, how does the concept of opportunity cost differ from explicit and implicit costs?
Opportunity cost looks at what you give up when you choose one option over another. Other options are incorrect because This answer confuses the types...
In the context of profit maximization, which of the following scenarios best illustrates the concept of opportunity cost in decision-making?
All the options show opportunity cost. Other options are incorrect because This choice focuses on one crop but misses the bigger picture; This option ...
In a scenario where a business owner decides to invest $10,000 in a new project instead of using that money to pay off existing debts, what is the opportunity cost of this decision?
The opportunity cost is what you give up when you make a choice. Other options are incorrect because Some might think the interest is the cost, but th...
In economics, what does opportunity cost represent in the context of profit calculation?
Opportunity cost is what you give up when you choose one option over another. Other options are incorrect because Some might think opportunity cost is...
What is the opportunity cost when calculating profit, considering explicit costs involved in a business operation?
Opportunity cost is what you give up when you choose one option over another. Other options are incorrect because Some might think total revenue is th...
Arrange the following steps in the correct order to calculate economic profit considering opportunity cost: A) Identify total revenue B) Subtract total explicit costs C) Subtract opportunity costs D) Determine economic profit
First, you find total revenue. Other options are incorrect because This option mixes up the order; This option starts with costs instead of revenue....
Which of the following statements correctly reflect the concept of opportunity cost in profit calculation? Select all that apply.
All options misunderstand opportunity cost. Other options are incorrect because This suggests opportunity cost only looks at money; This mixes up prof...
A small business owner decides to invest $50,000 into a new product line instead of using that money to expand their current operations, which could have generated an additional $70,000 in profits. If the owner reports an accounting profit of $30,000 from the new product line, which of the following best explains the underlying reason for their lower overall economic profit?
The owner missed out on $70,000 by not expanding. Other options are incorrect because Some people think accounting profit is all that matters; This op...
Alex is considering leaving his job, where he earns $60,000 a year, to start a new business. He estimates that the business will generate $100,000 in revenue and incur costs of $70,000 in its first year. What is the economic profit of Alex's business venture, taking into account the opportunity cost of his salary?
To find economic profit, subtract both costs and opportunity costs from revenue. Other options are incorrect because This answer might come from only ...
If a business earns $175,000 in revenue with total costs of $125,000, what must they consider to accurately assess their economic profit?
To find true economic profit, a business must think about what they give up. Other options are incorrect because Focusing only on accounting profit ig...
A company earns $200,000 in revenue from its operations but incurs total costs of $150,000 and decides to forgo an alternative job offer that would have paid $70,000. How should the company classify its profit in relation to opportunity cost?
The company has an economic profit of $20,000 when we consider opportunity cost. Other options are incorrect because This answer confuses economic pro...
When calculating economic profit, it is crucial to consider __________, which represents the value of the next best alternative that is forgone when making a decision.
Opportunity cost is the value of what you give up when you choose one option over another. Other options are incorrect because Some might think accoun...
Opportunity cost only refers to monetary losses when comparing business decisions, and does not include non-monetary factors such as time or personal satisfaction.
Opportunity cost includes more than just money. Other options are incorrect because This answer suggests that only money matters; This answer implies ...
Opportunity cost is to economic profit as lost wages are to which of the following?
Forgone earnings are the money you miss out on when you choose one job over another. Other options are incorrect because Accounting profit is what you...
If a business owner chooses to invest in a new project instead of continuing their current job, which of the following best describes the opportunity cost?
Opportunity cost is what you give up when you make a choice. Other options are incorrect because Some might think the new project's revenue is the cos...
Master Opportunity Cost in Profit Calculation
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