AP Macroeconomics : How to find diagrams

Study concepts, example questions & explanations for AP Macroeconomics

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Example Questions

Example Question #1 : How To Find Diagrams

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

Possible Answers:

It is the sum of all explicit and implicit costs in all of the alternatives foregone to produce the 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 cost of the next best alternative that could be pursued with the resources used to produce a good

None of the other options

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