Explain what is meant by the term opportunity cost
What will be an ideal response?
The opportunity cost of something is measured by the next best alternative that we forgo, or give up, when we make a choice or a decision.
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According to the 1974 Constitution of the former Yugoslavia, nobody in Yugoslavia owns resources. Being a socialist country, the constitution claimed resources were owned by "society" as a whole. According to the economic way of thinking,
A) their economic problem would be solved. B) resources would finally be used efficiently, because the profit motive would be destroyed. C) people would use Yugoslavia's resources wastefully because they themselves wouldn't have to pay the opportunity cost. D) the central planners would know how to calculate the true values and costs of resource use.
If the average productivity of Indian firms is rising more quickly than the average productivity of American firms, which of the following would you expect to see? (India's currency is the rupee.)
A) an increase in the prices of Indian products B) a decrease in the value of the rupee relative to the dollar C) an increase in the quantity demanded of Indian products relative to American products D) All of the above are correct.