Suppose That Opportunity Costs Are Constant and That Fred Can

question 64

Multiple Choice

Suppose that opportunity costs are constant and that Fred can either bake a maximum of six pies or three cakes in a day. Ethel can either produce a maximum of eight pies or two cakes in a day. Ethel's opportunity cost to produce one cake is

• A) one-half pie.
• B) two pies.
• C) six pies.
• D) four pies.

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Definitions:

Debit Side

The left-hand side of a ledger account, recording increases in assets or expenses and decreases in liabilities or equity.

Account

A record in the general ledger that is used to collect and store debit and credit transactions.

Flow Of Accounting Data

The process by which financial information moves through an organization's accounting system to be documented and reported.

Ledger

A comprehensive collection of all accounts used by an organization, recording all financial transactions through debits and credits.