On a Graph We Draw a Consumer's Budget Constraint, Measuring

question 553

Multiple Choice

On a graph we draw a consumer's budget constraint, measuring the number of pineapples on the horizontal axis and the number of pencils on the vertical axis. If the slope of the budget constraint is -6, then

• A)a pineapple costs six times as much as a pencil.
• B)the opportunity cost of a pineapple is 6 pencils.
• C)the opportunity cost of a pencil is one-sixth of a pineapple.
• D)All of the above are correct.

---

Definitions:

Explicit Cost

Direct, out-of-pocket payments for goods or services that a company incurs in the course of doing business.

Economic Profit

The difference between the total revenue received by a firm and the total cost of all resources used, including opportunity costs.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision. It represents the benefits an individual, investor or business misses out on when choosing one alternative over another.

Implicit Rate

The implied rate of return that is not explicitly stated, often used in the context of comparing the cost of borrowing to the rate of return on investments.