#1.3 Choice and Opportunity Cost

Opportunity cost refers to the financial cost of purchasing an item.

Scarcity forces individuals, firms, and governments to make choices about resource allocation.

The fundamental economic problem exists because human wants are finite.

Making a choice does not involve giving up alternatives.

Governments use opportunity cost analysis to allocate resources between different priorities such as healthcare and defense.

Individuals do not experience opportunity cost when making personal choices.

Opportunity cost only applies to businesses and governments, not individuals.

Economic decision-making is based on considering alternatives and selecting the best use of resources.

All economies must address the questions of what, how, and for whom to produce.

Firms must ignore moral considerations when deciding how to produce goods.

Understanding opportunity cost helps decision-makers assess the real implications of their choices.

If a government chooses to invest in healthcare, the opportunity cost could be reduced spending on national defense.

Opportunity cost is irrelevant when resources are abundant.

An economy that prioritizes producing military goods will have no impact on the production of consumer goods.

Firms only use opportunity cost when making production decisions.

The concept of opportunity cost is useful for strategic decision-making at all levels of the economy.

Governments do not need to consider opportunity cost when distributing wealth and income.

Deciding what to produce involves determining which goods and services should be produced and in what quantities.

For whom to produce refers to determining how goods and services are distributed among different groups in society.

Understanding opportunity cost allows decision-makers to ignore trade-offs.