Theory of comparative advantage refers to the ability of a given nation to produce goods and services, not at a lower cost per unit, but at a lower opportunity cost compared to the other nations. Investopedia defines opportunity cost as the cost of an action not taken in order to pursue a particular course of action. Explicit costs are the direct cost of an action, executed either through a cash transaction or a physical transfer of resources. Market economies rely upon a price system to signal market actors to adjust production and investment. A simple way to view opportunity costs is as a trade-off. Fixed Costs or Supplementary Costs 8. O the price of a good in a country after the imposition of a tariff. 2. Increment and Sunk costs The increment costs are the additions to costs resulting from a change in product lines, introduction of a new product, replacement of obsolete plant and machinery, etc. Refer to Figure 3-23. The terms of trade refers to: the opportunity cost of producing a good. Financial costs of all the factors of production used to produce a good or service. A. the maximum amount of credit that a country can borrow for a particular line of credit. Production costs refer to the costs incurred by a business from manufacturing a product or providing a service. 1. For Bonovia, what is the opportunity cost of a pound of cheese? The opportunity cost of producing a particular good refers to: A) how much of something else must be given up to produce one additional unit of the good. Historical cost refers to the cost of an asset, acquired in the past whereas replacement cost refers to the cost, which has to be incurred for replacing the same asset. Question 9 (1 Point) Saved The Opportunity Cost Of Producing A Particular Good Refers To: A) How Much Of A Good Can Be Produced With The Existing Technology And Resources. Economists tend to disagree because: A. they tend to be difficult. 153. If good X is produced at increasing opportunity costs, then when the economy produces 120 units of good X (on the same PPF) the opportunity cost of producing 1Y (not 1X) could be a. If the economy produces quantities of goods below or above the PPF, then infer that resources are being allocated inefficiently. 10000, and then it will be called the money cost of producing 200 chairs. 3. This involves determining the value received from one going with the production of … Let's say you own a landscaping company and you add several brand-new lawn mowers to your business for $3,000. Businesses will consider opportunity cost as they make decisions about production, time management, and capital allocation. 1/4X. The opportunity cost of producing an additional coffee mug would be lowest at: A. If you are producing 600 tons of agricultural products per year, what is the maximum amount of manufactured products you can produce per year? If the opportunity cost for a producer to produce a good is lower than for another producer, this means that he has a comparative advantage in producing that good. B. C. C. D. D. E. The opportunity cost of producing an additional coffee mug would be equal at A, B, C and D. Question 37. Money Costs: Money cost is also known as the nominal cost. A) 300 tons B) 500 tons C) 600 tons D) 700 tons Answer: A Topic: Opportunity Cost and the Production Possibilities Curve, graphing 27) Refer to Figure 2.1. Comparative advantage refers to the ability of a party to produce a particular good or service at a lower opportunity cost than another. The following THREE questions refer to the diagram below, which illustrates the PPFs for two countries who are free to trade. The opportunity cost of producing cheese is identical in both countries. Opportunity costs apply to allocating resources in production.In economics, the production possibility frontier (PPF) refers to the point of allocating resources and producing goods and services in the most efficient way possible. b. if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount. D) applies only to imports, while an ad valorem tariff applies only to exports. In other words, opportunity cost can be defined as the lost opportunity of not being able to produce some other product. An economy that has the lowest opportunity cost for producing a particular good from ECON 102 at University of Illinois, Urbana Champaign Fixed and Variable Costs 7. The lower opportunity cost can be described as the ability of a nation to specialize in producing a particular good or service from a limited amount of resources. There are limited resources or limited spending capacity and to direct these resources in the direction of deriving maximum satisfaction, we find out the opportunity cost. Price formation relies on the interaction of supply and demand to reach or approximate an equilibrium where unit price for a particular good or service is at a point where the quantity demanded equals the quantity supplied. C) ham but not eggs. The following question refers to the table below, which shows the maximum number of goods X and Y that producers A and B can produce in one day. For easy and clear understanding, cost of production can be illustrated as: 1. A) 0.8 pounds of ham B) 1.25 pounds of ham C) 8 pounds of ham D) 16 pounds of ham. Production Costs 5. 5. The individual with the lowest opportunity cost of producing a particular good from BU 1003 at James Cook B. Value of the best alternative given up when a good or service is produced. D) neither ham nor eggs. B. they might be biased. Question: When an economist uses the term 'cost' referring to a firm, the economist refers to the: A) opportunity cost of producing a good or service, which includes both implicit and explicit cost. B) The Total Cost Of Production, Including Wages, For All Units Of The Good. the quantity of one good exchanged for a unit of another good. The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.. Essentially, opportunity cost is all about comparing one production option to another production option. In a market with only two goods, x and y, there are three possible options: produce all x and no y; produce all y and no x; or produce some x and some y. Selling Costs 6. D) ... names a particular good to which the tariff applies, while an ad valorem tariff applies to large classes of products . Opportunity cost has to do with what it costs a company to produce goods or services in terms of what could have been earned by using those same resources to produce different goods or services. B) eggs but not ham. Question: C) They Have The Lowest Opportunity Cost. Countries tend to have different opportunity costs of producing a specific good, either because of different climates, geography, technology or skills. A) both eggs and ham. Which good(s) does Finland have an absolute advantage producing? Value of all the alternatives given up when a good or service is produced. Average and Marginal Cost. For instance, the cost of producing 200 chairs is Rs. Countries tend to have different opportunity costs of producing a specific good, either because of different climates, geography, technology, or skills. 4. Answer to The opportunity cost of producing a particular good refers to ___. Which of the following statements in TRUE? In this way, opportunity cost is a relative measure of costs. the quantity of a good demanded by U.S. consumers at a market- clearing price. Refer to the production possibility curve for Ricardia below. Cost Type # 1. The cost incurred on the next best alternative that is foregone to acquire or produce a particular good is known as opportunity cost. If she bakes only cookies, B. … A. 26) Refer to Figure 2.1. D) They Have An Absolute Advantage. In that regard, your explicit opportunity cost is … It is nothing but the expenses incurred by a firm to produce a commodity. Types of opportunity costs Explicit costs. In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. In particular, its slope gives the opportunity cost of producing one more unit of the good in the x-axis in terms of the other good (in the y-axis). The law of increasing opportunity costs states that: a. the sum of the costs of producing a particular good cannot rise above the current market price of that good. Even if one country has an absolute advantage in producing all goods, different countries could still have different comparative advantages. Producers faced with limited resources must choose between various production scenarios. In particular, its slope gives the opportunity cost of producing one more unit of the good in the x-axis in terms of the other good (in the y-axis). What is the marginal opportunity cost (MC) of producing good x in each country? Definition: Opportunity cost refers to the value of the other choice sacrificed while choosing a better or suitable alternative.It is also termed as alternative cost. Money Cost 4. In other words, explicit opportunity costs are the out-of-pocket costs of a firm. Anita can bake 10 cakes in a day, but has no time left to make cookies. Increasing the production of a particular good will cause the price of the good to remain constant. Refer to Table 3-35. Opportunity Cost 3. Real Cost: The term “real cost of production” refers to the physical quantities of various factors used in producing a commodity. A. The law of increasing opportunity costs says that, as we produce more of a particular good, the opportunity cost of producing that good increases. B. Opportunity cost is also known as alternative cost or displacement cost or transfer cost. B. Explain Opportunity Costs for Production. Amount of resources used to produce a good or service. The graph indicates that with the resources and technology it has available, Ricardia: can produce either 40 units of rye or 20 units of eggs. Trade-offs take place in any decision that requires forgoing one option for another. Producer A has the comparative advantage in producing X. Would be lowest at: a produces quantities of various factors used in producing x does Finland an. 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