If Someone Can Produce a Good at a Lower Opportunity

question 198

Multiple Choice

If someone can produce a good at a lower opportunity cost, she ________ in producing that good.

• A) has a comparative advantage
• B) has an absolute advantage
• C) experiences no diminishing returns
• D) experiences no marginal costs

Understand the concept and implications of opportunity cost.

Describe factors contributing to the standard of living differences between countries.

Explain how laws and unemployment rates affect a nation's production capacity.

Identify the characteristics of capital and its role in economic growth.

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Definitions:

Specialization

The process of focusing on and becoming expert in a particular area of production or knowledge to increase efficiency.

Falling Costs

A situation where the expenses associated with producing a good or service decrease, often leading to lower prices for consumers.

Economies of Scale

The cost advantage that arises with increased output of a product, where average costs start to fall as production scales up.

Marginal Returns

denotes the additional output obtained by adding one more unit of a specific input, while keeping other inputs constant.