Which of the Following Choices Correctly Illustrates How Changes in Opportunity

question 228

Multiple Choice

Which of the following choices correctly illustrates how changes in opportunity costs affect supply?

• A) A farmer produces corn and wheat. The price of wheat rises, so he shifts his resources toward wheat and the supply of wheat rises.
• B) A fisherman fishes for lobsters and oysters. The price of lobsters rises, so he decides to spend more of his time fishing for oysters because he can make the same amount of money with fewer lobsters.
• C) A textbook for economics becomes cheaper, so more students opt to buy that particular textbook.
• D) Milk and cereal are complementary goods, so when the price of cereal falls, the quantity supplied of milk rises.

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Definitions:

Correlation Coefficient

A statistical measure that calculates the strength of the relationship between the relative movements of two variables.

Standard Deviation

A measure of the dispersion or variability of a set of data points or investment returns, indicating the degree of risk.

Portfolio

A collection of various investments held by an individual, company, or financial institution.

Risky Bond Portfolio

A collection of bonds with higher default risk, which may offer higher yields in compensation for the increased risk of loss.