As an Economy Increasingly Specialises in Producing One Good, the Opportunity

question 10

Multiple Choice

As an economy increasingly specialises in producing one good, the opportunity cost of that good increases. The opportunity cost increases because

• A) as more of a good is produced the profit from its production must rise.
• B) not all goods are equally valuable.
• C) resources are not equally productive in all activities.
• D) what must be paid to resources increases.
• E) human wants are virtually unlimited.

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Definitions:

Discount Period

It refers to the time frame in which a discount is available for early payment under the credit terms of a transaction.

Credit Period

The time frame allowed by a creditor for a debtor to pay an outstanding bill or loan without incurring penalties or interest.

Cash Discount

An incentive offered by sellers to purchasers for paying an invoice promptly, usually defined as a percentage reduction in the invoice amount.

EOQ Model

Economic Order Quantity model; an inventory management method used to determine the optimum order quantity that minimizes the total inventory holding costs and ordering costs.