Unit 1: Economic Foundations

Answer: A — The correct answer is A) $100 because the opportunity cost of choosing to grow apples is the potential profit she could have made from growing berries. If Maria chooses to grow apples, she gives up the chance to produce 200 berries, which could have been sold for $0.50 each, resulting in a potential profit of $100. The other options are incorrect because they do not accurately reflect the opportunity cost of choosing to grow apples. Option B is incorrect because it is the potential profit from growing berries plus an additional $50. Option C is incorrect because it is the potential profit from growing berries if they were sold for $1 each, rather than $0.50. Option D is incorrect because it is half of the potential profit from growing berries.

Answer: C — The correct answer is C because the opportunity cost of choosing to grow corn is the profit that Maria would have made if she had chosen to grow wheat instead. Since Maria can produce 200 bushels of wheat and sell each bushel for $2, she would have made $400 if she had chosen to grow wheat. However, if she chooses to grow corn, she can produce 250 bushels, but she can only sell each bushel for $1.50, making her total revenue $375. This means she is giving up $25 in revenue, but also giving up 50 bushels of potential production (200 bushels of wheat - 150 bushels of corn that would have the same value as the 200 bushels of wheat at $2 each, which is the same as 250 bushels of corn at $1.50 each, 250 - 200 = 50). The other options are incorrect because they do not accurately reflect the opportunity cost of Maria's decision.

Answer: A — The correct answer is A) $120,000 because the opportunity cost of a decision is the profit that could have been earned from the next best alternative. In this case, if Alex chooses to expand the current product line, they will forgo the opportunity to open a new retail location, which would have generated a profit of $120,000. The other options are incorrect because B) $150,000 is the expected profit from expanding the current product line, C) $100,000 is the investment required for either option, and D) $80,000 is not relevant to the scenario.

Answer: B — The correct answer is B because the opportunity cost of a decision is the value of the next best alternative that is given up. In this case, if Rachel chooses to produce 200 candles, she gives up the opportunity to produce 300 soaps, which is the next best alternative use of her 100 hours of labor. Option A is incorrect because the opportunity cost is not 0, even if all labor hours are used. Option C is incorrect because the opportunity cost is not the cost of raw materials, but rather the value of the alternative product that could have been produced. Option D is incorrect because the opportunity cost is not the profit from selling the candles, but rather the value of the alternative product that could have been produced.

Answer: B — The correct answer is B) $300 because the opportunity cost of choosing to grow corn is the difference in profit between growing wheat and growing corn, which is $1,800 - $1,500 = $300. This represents the amount of profit that Maria gives up by choosing to grow corn instead of wheat. The other options are incorrect because A) $1,500 is the profit from growing corn, C) $1,800 is the profit from growing wheat, and D) $2,100 is not a relevant amount in this scenario.