Suppose One Worker in New Ralph Island Can Produce 40

question 73

Multiple Choice

Suppose one worker in New Ralph Island can produce 40 walking sticks or 10 boomerangs each hour.The opportunity cost of producing 1 walking stick is _____.

• A)40 boomerangs
• B)0.01 hour of labor
• C)4 boomerangs
• D)0.25 boomerangs
• E)0.5 hours of labor

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Definitions:

Opportunity Costs

The value of the best alternative forgone when a decision is made to pursue a particular course of action.

Mixed Costs

Mixed costs are expenses that contain both variable and fixed cost elements, changing in total with the level of activity but not directly in proportion to changes in activity level.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not affect future investment or business decisions.

Variable Costs

Expenses that directly fluctuate in relation to the amount of goods produced or the volume of sales.