The Basic Economic Problem Flashcards
1
Q
What is the opportunity cost?
A
It is the next best alternative forgone upon making a choice. The opportunity cost is the value of that which must be given upon to acquire or achieve another option.
2
Q
Why the opportunity cost exist?
A
Because of scarcity. Due to unlimited wants, but limited resources, we are forced to make choices.
If resources were limitless, no action would be at the expense of any other - the opportunity cost of any action would be zero.
3
Q
What diagram helps to explain opportunity cost?
A
The Production Possibility Curve (PPC).
