1. Which of the following best defines opportunity cost? (A) It is the cost of producing those goods most desired by a given economy. (B) It is the cost of the input mix that will lead to the greatest rate of growth for a given company. (C) It is the amount of one product that must be given up in order to produce an additional unit of another product. (D) It is the use of the least-cost method of production. (E) It is the cost of labor used in the production process. 2. Which of the following explains why a production possibilities curve is often represented as concave (bowed out) from the origin? (A) The law of demand (B) The law of supply (C) Constant returns to scale (D) Decreasing opportunity cost (E) Increasing opportunity cost 3. Assume that consumers consider popcorn and pretzels to be substitutes. A significant decrease in the supply of popcorn will affect the pretzel market by (A) increasing the demand for pretzels and therefore the supply of pretzels (B) increasing the demand for pretzels and therefore the price of pretzels (C) decreasing the demand for pretzels and therefore the price of pretzels (D) increasing the supply of pretzels and therefore the price of pretzels (E) decreasing the supply of pretzels and therefore the price of pretzels
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Step 1: Opportunity cost is the amount of one product that must be given up in order to produce an additional unit of another product. Show more…
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