AP Macroeconomics : How to find diagrams

Study concepts, example questions & explanations for AP Macroeconomics

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Example Questions

Example Question #1 : Other Diagrams

Which of the following explanations best represent the concept of opportunity costs?

Possible Answers:

It is the sum of all the implicit costs represented in all the alternative opportunities foregone in the production of a good

It includes the explicit costs included in the production of a good, which include all the payments made to the factors of production. 

It is the sum of all explicit and implicit costs in all of the alternatives foregone to produce the good

None of the other options

It is the cost of the next best alternative that could be pursued with the resources used to produce a good

Correct answer:

It is the cost of the next best alternative that could be pursued with the resources used to produce a good

Explanation:

The definition of the opportunity cost is the value of the highest valued alternative that is foregone in the production of a good. It is not the sum of all the alternative options, but rather only the most highly valued one.  

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