Multiple Choice
In the context of scarcity and choice, what does a low arithmetic density typically indicate about the allocation of resources in a given area?
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0. Basic Principles of Economics
Scarcity and Choice
Multiple Choice
When a resource, such as space in the factory, has no alternative use, its opportunity cost is:
A
equal to the cost of production
B
zero
C
equal to its market value
D
infinite
Verified step by step guidance1
Understand the concept of opportunity cost: it represents the value of the next best alternative foregone when a resource is used for a particular purpose.
Identify that if a resource has no alternative use, it means there is no other way to employ that resource to generate value or benefit.
Since there is no alternative use, the value of the next best alternative foregone is zero because nothing is being given up by using the resource in its current way.
Recognize that opportunity cost is not about the cost of production or market value in this case, but strictly about the value of the best alternative use.
Conclude that when a resource has no alternative use, its opportunity cost is zero because there is no alternative value being sacrificed.
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