Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The profit lost from not producing Product B
B
The total cost of producing Product A
C
The cost of materials for both products
D
The time taken to produce Product A
Understanding the Answer
Let's break down why this is correct
Answer
When a company chooses to use its resources to produce Product A instead of Product B, the opportunity cost is what the company gives up by not making Product B. This means that the value or benefit that Product B would have brought is lost. For example, if the company could have made a profit of $100,000 from Product B but only expects to make $80,000 from Product A, the opportunity cost is the $100,000 profit from Product B. Understanding opportunity cost helps companies make better decisions by considering not just what they gain, but also what they lose by not choosing the alternative. Therefore, it's important to weigh both options before deciding where to allocate resources.
Detailed Explanation
The opportunity cost is what you give up when you make a choice. Other options are incorrect because Some might think the total cost of making Product A is the opportunity cost; This option suggests that the cost of materials matters.
Key Concepts
opportunity cost
resource allocation
Topic
Understanding Opportunity Costs
Difficulty
medium level question
Cognitive Level
understand
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