Multiple Choice
Which of the following scenarios most accurately reflects the concept of scarcity?
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0. Basic Principles of Economics
Scarcity and Choice
Multiple Choice
In the context of scarcity and choice, what is the opportunity cost of producing product B?
A
The total cost of all resources used to produce product B
B
The profit earned from selling product B
C
The value of the next best alternative forgone to produce product B
D
The market price of product B
Verified step by step guidance1
Understand the concept of opportunity cost: it is the value of the next best alternative that must be given up when making a choice.
Identify that producing product B requires using scarce resources that could have been used to produce something else (the next best alternative).
Recognize that the opportunity cost is not simply the total cost of resources used or the profit earned, but rather what you sacrifice by not choosing the next best alternative.
Express the opportunity cost of producing product B as the value (usually measured in terms of benefits or profits) of the next best alternative use of those resources.
Conclude that the opportunity cost of producing product B is the value of the next best alternative forgone to produce product B.
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