The Opportunity Cost of Using One Unit of the Constrained

question 47

Multiple Choice

The opportunity cost of using one unit of the constrained resource in a volume trade-off decision is equal to:

• A) the profitability index for the company's best selling product.
• B) the profitability index for the product whose production would be cut back if necessary.
• C) the profitability index of the product with the fastest growing sales.
• D) the profitability index of the company's most profitable product.

---

Definitions:

Perfectly Elastic

Describes a situation in economics where the quantity demanded or supplied responds infinitely or extremely to a change in price.

Total Revenue

The total amount of income generated by the sale of goods or services related to a company's primary operations.

Quantity Demanded

The specific amount of a product that consumers are willing to buy at a given price, assuming all other factors are held constant.

Price Elastic

A measure of how much the quantity demanded of a good responds to a change in the price of that good. It indicates the sensitivity of consumers to price changes.