Which of the following statements about opportunity cost are correct? a. The opportunity cost of an action is the highest-valued allernative forgone. b. Opportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the PPF C. Opportunity cost of a good is the increase in the quantity produced of one good divided by the decrease in the quantity produced of another good as we move along the PPF d. Opportunity cost of a good cannot be accurately measured along a PPF because the PPF shows only two goods. A. Statements b and d are correct B. Statements a and b are correct C. Statements a and c are correct D. Statements c and d are correct

Question

Which of the following statements about opportunity cost are correct? a. The opportunity cost of an action is the highest-valued allernative forgone. b. Opportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the PPF C. Opportunity cost of a good is the increase in the quantity produced of one good divided by the decrease in the quantity produced of another good as we move along the PPF d. Opportunity cost of a good cannot be accurately measured along a PPF because the PPF shows only two goods. A. Statements b and d are correct B. Statements a and b are correct C. Statements a and c are correct D. Statements c and d are correct

Answer 1

The correct answer is C. Statements a and c are correct.Statement a is correct because the opportunity cost of an action is indeed the highest-valued alternative forgone. When you choose one option over another, you give up the benefits of the alternative option, and that's the opportunity cost.Statement c is also correct. The opportunity cost of a good is the increase in the quantity produced of one good divided by the decrease in the quantity produced of another good as we move. This is because as we allocate more resources to produce one good, we have to produce less of the other good, and the opportunity cost measures the trade-off between the two.Statement b is incorrect because it describes the marginal rate of technical substitution (MRTS), not the opportunity cost. The MRTS measures the rate at which one good can be substituted for another while keeping the level of output constant, whereas the opportunity cost measures the trade-off between two alternatives in terms of output.Statement d is also incorrect because the opportunity cost can be measured along a PPF. The PPF shows the trade-offs between two goods, and the opportunity cost is precisely the trade-off between these two goods.

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