Cost Type # 1. Opportunity cost has to do with what it costs a company to produce goods or services in terms of what could have been earned by using those same resources to produce different goods or services. Average and Marginal Cost. The following question refers to the table below, which shows the maximum number of goods X and Y that producers A and B can produce in one day. Fixed and Variable Costs 7. If the opportunity cost for a producer to produce a good is lower than for another producer, this means that he has a comparative advantage in producing that good. A) 0.8 pounds of ham B) 1.25 pounds of ham C) 8 pounds of ham D) 16 pounds of ham. 10000, and then it will be called the money cost of producing 200 chairs. D) neither ham nor eggs. Opportunity costs apply to allocating resources in production.In economics, the production possibility frontier (PPF) refers to the point of allocating resources and producing goods and services in the most efficient way possible. Opportunity cost is also known as alternative cost or displacement cost or transfer cost. Explicit costs are the direct cost of an action, executed either through a cash transaction or a physical transfer of resources. Producers faced with limited resources must choose between various production scenarios. 1. In particular, its slope gives the opportunity cost of producing one more unit of the good in the x-axis in terms of the other good (in the y-axis). B. they might be biased. Countries tend to have different opportunity costs of producing a specific good, either because of different climates, geography, technology, or skills. A simple way to view opportunity costs is as a trade-off. Explain B. Definition: Opportunity cost refers to the value of the other choice sacrificed while choosing a better or suitable alternative.It is also termed as alternative cost. A. Increment and Sunk costs The increment costs are the additions to costs resulting from a change in product lines, introduction of a new product, replacement of obsolete plant and machinery, etc. This involves determining the value received from one going with the production of … Investopedia defines opportunity cost as the cost of an action not taken in order to pursue a particular course of action. The opportunity cost of producing an additional coffee mug would be lowest at: A. The graph indicates that with the resources and technology it has available, Ricardia: can produce either 40 units of rye or 20 units of eggs. 26) Refer to Figure 2.1. For easy and clear understanding, cost of production can be illustrated as: 1. A. If the economy produces quantities of goods below or above the PPF, then infer that resources are being allocated inefficiently. Question: When an economist uses the term 'cost' referring to a firm, the economist refers to the: A) opportunity cost of producing a good or service, which includes both implicit and explicit cost. C) ham but not eggs. Increasing the production of a particular good will cause the price of the good to remain constant. the quantity of one good exchanged for a unit of another good. In particular, its slope gives the opportunity cost of producing one more unit of the good in the x-axis in terms of the other good (in the y-axis). The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.. If she bakes only cookies, Financial costs of all the factors of production used to produce a good or service. The lower opportunity cost can be described as the ability of a nation to specialize in producing a particular good or service from a limited amount of resources. The individual with the lowest opportunity cost of producing a particular good from BU 1003 at James Cook A) both eggs and ham. In other words, explicit opportunity costs are the out-of-pocket costs of a firm. Real Cost: The term “real cost of production” refers to the physical quantities of various factors used in producing a commodity. Which of the following statements in TRUE? 4. A. B. Opportunity Cost 3. Which good(s) does Finland have an absolute advantage producing? 153. Market economies rely upon a price system to signal market actors to adjust production and investment. D) applies only to imports, while an ad valorem tariff applies only to exports. Essentially, opportunity cost is all about comparing one production option to another production option. Opportunity Costs for Production. B. Comparative advantage refers to the ability of a party to produce a particular good or service at a lower opportunity cost than another. Economists tend to disagree because: A. they tend to be difficult. 1/4X. … Producer A has the comparative advantage in producing X. B. The law of increasing opportunity costs says that, as we produce more of a particular good, the opportunity cost of producing that good increases. In that regard, your explicit opportunity cost is … In this way, opportunity cost is a relative measure of costs. Selling Costs 6. The opportunity cost of producing a particular good refers to: A) how much of something else must be given up to produce one additional unit of the good. The opportunity cost of producing cheese is identical in both countries. In a market with only two goods, x and y, there are three possible options: produce all x and no y; produce all y and no x; or produce some x and some y. Refer to Figure 3-23. The law of increasing opportunity costs states that: a. the sum of the costs of producing a particular good cannot rise above the current market price of that good. The following THREE questions refer to the diagram below, which illustrates the PPFs for two countries who are free to trade. What is the marginal opportunity cost (MC) of producing good x in each country? There are limited resources or limited spending capacity and to direct these resources in the direction of deriving maximum satisfaction, we find out the opportunity cost. the maximum amount of credit that a country can borrow for a particular line of credit. B) eggs but not ham. Refer to Table 3-35. In other words, opportunity cost can be defined as the lost opportunity of not being able to produce some other product. Amount of resources used to produce a good or service. Countries tend to have different opportunity costs of producing a specific good, either because of different climates, geography, technology or skills. Anita can bake 10 cakes in a day, but has no time left to make cookies. The cost incurred on the next best alternative that is foregone to acquire or produce a particular good is known as opportunity cost. Money Cost 4. In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. Money Costs: Money cost is also known as the nominal cost. D) ... names a particular good to which the tariff applies, while an ad valorem tariff applies to large classes of products . For instance, the cost of producing 200 chairs is Rs. It is nothing but the expenses incurred by a firm to produce a commodity. Theory of comparative advantage refers to the ability of a given nation to produce goods and services, not at a lower cost per unit, but at a lower opportunity cost compared to the other nations. A) 300 tons B) 500 tons C) 600 tons D) 700 tons Answer: A Topic: Opportunity Cost and the Production Possibilities Curve, graphing 27) Refer to Figure 2.1. For Bonovia, what is the opportunity cost of a pound of cheese? Types of opportunity costs Explicit costs. The terms of trade refers to: the opportunity cost of producing a good. Value of all the alternatives given up when a good or service is produced. Historical cost refers to the cost of an asset, acquired in the past whereas replacement cost refers to the cost, which has to be incurred for replacing the same asset. D) They Have An Absolute Advantage. Question: C) They Have The Lowest Opportunity Cost. Businesses will consider opportunity cost as they make decisions about production, time management, and capital allocation. B. C. C. D. D. E. The opportunity cost of producing an additional coffee mug would be equal at A, B, C and D. Question 37. 5. An economy that has the lowest opportunity cost for producing a particular good from ECON 102 at University of Illinois, Urbana Champaign If you are producing 600 tons of agricultural products per year, what is the maximum amount of manufactured products you can produce per year? B) The Total Cost Of Production, Including Wages, For All Units Of The Good. Even if one country has an absolute advantage in producing all goods, different countries could still have different comparative advantages. Refer to the production possibility curve for Ricardia below. Production costs refer to the costs incurred by a business from manufacturing a product or providing a service. Let's say you own a landscaping company and you add several brand-new lawn mowers to your business for $3,000. b. if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount. 2. Fixed Costs or Supplementary Costs 8. 3. the quantity of a good demanded by U.S. consumers at a market- clearing price. Price formation relies on the interaction of supply and demand to reach or approximate an equilibrium where unit price for a particular good or service is at a point where the quantity demanded equals the quantity supplied. Question 9 (1 Point) Saved The Opportunity Cost Of Producing A Particular Good Refers To: A) How Much Of A Good Can Be Produced With The Existing Technology And Resources. Production Costs 5. If good X is produced at increasing opportunity costs, then when the economy produces 120 units of good X (on the same PPF) the opportunity cost of producing 1Y (not 1X) could be a. Answer to The opportunity cost of producing a particular good refers to ___. O the price of a good in a country after the imposition of a tariff. Value of the best alternative given up when a good or service is produced. 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