The Concept of Opportunity Cost

question 118

Multiple Choice

The concept of opportunity cost

• A)cannot be explained by using a production possibilities frontier.
• B)explains that goods are swapped for other goods.
• C)implies that when a person is more efficient in the production of one good, he should produce that good and exchange it for some good that he is relatively less efficient at producing.
• D)implies that a double coincidence of wants must be present for exchange to take place.
• E)implies that because productive resources are scarce, we must give up some of one good to acquire more of another.

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Definitions:

Operations

Activities involved in the day-to-day running of a business for the purpose of producing value for the stakeholders.

Raw Materials

The basic materials and components used at the start of the production process, essential for creating the finished product.

Inventories

Quantifiable goods or materials that a business holds for the purpose of sale in the ordinary course of business, production, or use.

Job-Order Costing

A cost accounting system that collects costs individually for each job, suitable for customized orders or distinctly identifiable products.