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:

Cournot Duopolists

Firms in a duopoly market structure who decide on their output level assuming the output of the competitor is fixed, leading to a strategic interdependence.

Total Cost

The sum of fixed and variable costs incurred in the production of goods or services.

Inverse Demand

A representation of demand that shows the price as a function of quantity demanded, contrary to the typical demand curve.

Cost Function

An equation or mathematical formula that describes the cost of producing a product or service as a function of input prices and output quantity.