Why Would It Be a Mistake to Treat Opportunity Costs

question 121

Multiple Choice

Why would it be a mistake to treat opportunity costs and explicit monetary costs as identical?

• A)Because sometimes the market does not function well.
• B)Because opportunity costs are different for different goods.
• C)Because there are trade-offs involved in any decision.
• D)Because of existence of efficient markets.

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Definitions:

Break-Even Point

An output at which a firm makes a normal profit (total revenue = total cost) but not an economic profit.

Variable Costs

Costs that vary directly with the level of production.

Marginal Revenue

The increase in revenue that results from the sale of an additional unit of output.

Total Revenue

The total income received by a firm from the sale of its goods or services, calculated as the unit price multiplied by the quantity sold.