Explain why the scarcity of resources causes people and nations to consider opportunity costs and trade-offs among choices. Give a personal example of an opportunity cost that you have faced and the impact of the decision you made.
Answer: Scarcity of resources can be regarded as the prime reason for opportunity cost as you're allowed to choose only one alternative among two and leave the other due to the inability of you to pay for both. This happens only because resources are scarce. One important decision regarding opportunity cost in my life is opting for graduation over work where the opportunity cost is the amount lost because I've not worked and here the limited resource is time and this indeed allowed me to pursue education where I would come up with more engaging salary than my opportunity cost which is a good sign and the decision I've taken is correct
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If the price is less than a perfectly competitive firm's minimum average variable cost, the firm
A) makes an economic profit. B) operates and incurs an economic loss equal to total fixed cost. C) operates and incurs an economic loss equal to average variable cost. D) shuts down and incurs an economic loss equal to total fixed cost. E) shuts down and incurs an economic loss equal to average variable cost.
Which of the following statements is TRUE?
A) Perfectly competitive markets are efficient, but monopoly markets never are efficient. B) Perfectly competitive markets always reach equilibrium but monopoly markets never reach equilibrium. C) Perfect price discriminating monopolists can eliminate all deadweight losses and achieve efficiency. D) All the above statements are true.