To Find the Opportunity Cost of Producing One More Unit

question 173

Multiple Choice

To find the opportunity cost of producing one more unit of any product while on the production possibilities frontier requires

• A) setting the amounts of the two products equal to each other.
• B) setting the change in one product equal to the change in the other product.
• C) dividing the amount of the product forgone by the amount of the product gained.
• D) subtracting the change in the product whose production increased from the change in the product whose production decreased.
• E) None of these describe how to find opportunity cost.

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Definitions:

Short Run

Period of time in which quantities of one or more production factors cannot be changed.

Long Run Equilibrium

Long run equilibrium occurs when all inputs can be adjusted by firms, markets are perfectly competitive, and economic profit is zero, leading to a situation where firms just cover their opportunity costs.

Monopolistically Competitive

A market structure characterized by many sellers offering differentiated products, leading to competition based on product quality, brand, and price.

Zero Profits

A situation where a firm's total revenues exactly equal its total costs, typically in the long run in perfectly competitive markets.