What is the opportunity cost of allocating more and more resources to the production of capital goods?
A. a decrease in real income
B. the amount of consumption goods that could have been produced
C. the increase in pollution
D. the environmental goods foregone
Answer: B. the amount of consumption goods that could have been produced
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Suppose that price is below the minimum average total cost but above the minimum average variable cost. In the short run, a firm that is a price taker would:
A. immediately shut down and get out of the industry. B. continue to produce a quantity such that marginal revenue equals marginal cost. C. shut down temporarily, in hopes of restarting in the near future. D. cut price and expand output in hopes of achieving economies of scale
Refer to Mexico and Japan. Can trade in food and cloth benefit Mexico and Japan?
a. It cannot benefit Japan, because Japan cannot successfully compete with Mexico.
b. It cannot benefit Mexico, because Japan is too small to be an effective trading partner.
c. It can benefit both only if the people in Mexico and Japan have different tastes.
d. It can benefit both if Mexico specializes in food and Japan specializes in cloth.