Which of the Following Choices Correctly Illustrates How Changesin Opportunity

question 4

Multiple Choice

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

• A)A farmer produces corn and wheat.The price of wheat rises; so he shifts his resources towards 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:

Required Rate

This is the minimum expected rate of return on an investment, dictating the least acceptable compensation for investing capital.

Salvage Value

A prediction of what an asset will be worth on the market at the close of its effective life.

Project Life

The duration from the initiation to the completion of a project, encompassing all stages of development, execution, and finalization.

Profitability Index

A ratio or index that measures the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.