The Concept of Opportunity Cost in a Fully Employed Economy

question 184

Multiple Choice

The concept of opportunity cost in a fully employed economy with technology and resources held constant tells us that

• A)expansion of output in one industry means expansion cannot occur in another industry.
• B)expansion of output in one industry means output in another industry must contract.
• C)output cannot be increased in any industry.
• D)output of all industries must contract until more resources are found.

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Definitions:

Increase Unemployment

A scenario where the number of unemployed individuals in the workforce rises, which can result from various factors including economic downturns, technological changes, or regulatory actions.

Natural Rate

A term often used to refer to the natural rate of unemployment, which is the level of unemployment consistent with a stable rate of inflation.

Frictional Unemployment

Short-term unemployment that arises from the process of workers moving between jobs, including fresh entrants to the labor market.

Labor Unions

Organizations formed by workers from related fields that work for the collective rights of the members, including better wages, working conditions, and benefits.