Question

In the context of the production possibilities curve, opportunity cost is measured in:

a) dollars paid for the goods.
b) the quantity of other goods given up.
c) the value of the resources used.
d) changing technology.
e) units of satisfaction.

Answer 1

Opportunity cost within the production possibilities curve framework is measured in the quantity of other goods foregone. It reflects the trade-offs made when resources are allocated towards one option over another.

Step-by-step explanation:

In the context of the production possibilities curve, opportunity cost is measured in (b) the quantity of other goods given up. This measurement is an expression of the cost of what is forfeited when a choice is made to allocate resources towards the production of one good over another.

The absolute value of the slope of any production possibilities curve symbolizes this cost: for every additional unit produced of a good on the horizontal axis, there is a specific amount of another good on the vertical axis that must be sacrificed.

Opportunity cost is fundamental in economics, serving as a critical concept in decision-making. It represents the alternatives foregone when resources such as time, money, or materials are allocated for a specific purpose. The concept strives to quantify the trade-off between different choices in order to make rational economic decisions.