Cars Bicycles A 1500 0 B 1100 500 C 800 700 D 500 900 E 0 1100 Using the table p
ID: 2496062 • Letter: C
Question
Cars Bicycles
A 1500 0
B 1100 500
C 800 700
D 500 900
E 0 1100
Using the table provided in Step 1, answer the following questions in a one-page (250-word) document:
• Determine the opportunity cost of additional production at different outputs.
• Determine which particular combination(s) is most efficient.
• What are the components of an efficient allocation?
• How would advancements in assembly line technology for automobile production affect the production of cars and bicycles?
• Suppose the government imposes a new, expensive tax on gasoline. How might this affect the production of cars and bicycles?
Explanation / Answer
the opportunity cost for the first level of output will be zero.
the pportunity cost means the cost of the nextbest alternative forgone.
In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives. Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that would have been had by taking the second best available choice.[1] The New Oxford American Dictionary defines it as "the loss of potential gain from other alternatives when one alternative is chosen." Opportunity cost is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice."[2] The notion of opportunity cost plays a crucial part in attempts to ensure that scarce resources are used efficiently.[3] Thus, opportunity costs are not restricted to monetary or financial costs: the real costof output forgone, lost time, pleasure or any other benefit that provides utilityshould also be considered opportunity costs.
What is Opportunity Cost?
The basic economic problem is the issue of scarcity. Because resources are scarce but wants are unlimited, people must make choices. This lesson showcases the most important concept in macroeconomics, which is the concept of opportunity cost. Very simply, everyone has the same amount of hours in a day, but we all make different decisions about what we do, what we choose to buy, and how we spend our time. What determines these choices? Opportunity cost does.
Every time you make a choice, there is a certain value you place on that choice. You might not know it or think about it, but every choice has a value to you. When you choose one thing over another, you're saying to yourself, I value this more than another choice I had.
The opportunity cost of a choice is what you gave up to get it. If you have two choices - either an apple or an orange - and you choose the apple, then your opportunity cost is the orange you could have chosen but didn't. You gave up the opportunity to take the orange in order to choose the apple. In this way, opportunity cost is the value of the opportunity lost.
opportunity cost examples are suppose if you have $100 and you have to make a choice betwen having unch in a nice restaurant, or buying 7 albums of music, now if you choose, the second alternative then the opportunity cost is the delicious food which you did not choose.
so here in this question the opportunity cost is zero at initial level as the producer is producing 1500 of cars and zero cycles.
In the next level:- The producer chose to produce 100 units of car and 500 of cycles so here the opportunity cost is 600 which the producer did not choose to produce. like wise this goes on.
2- D is the most efficient combination of producion.
3-A feature of economically efficient allocation is that no reallocation can make anyone better off without making at least on person worse off, a condition that is described as "Pareto optimal". The relative efficiency of alternative allocations can be analysed with respect to this, i.e. in terms of whether they provide a "Pareto improvement". A change in allocation is considered desirable if at least one person gains in welfare and no one loses. However, this criterion proves too stringent in practice as few changes can be made in the real world that do not reduce the well-being of others. For this reason, an adaptation is usually employed; this is described as a 'potential Pareto improvement' or the Kaldor-Hicks criterion. A change in allocation is considered desirable if those individuals who gain from the change can hypothetically compensate those who lose and still be better off than they were previously. It is anticipated that compensation does not take place, owing to difficulties of identifying and compensating all necessary individuals. The criterion of potential Pareto improvement forms the basis of cost-benefit analysis, which is used to analyse the relative economic efficiency of alternative courses of action (e.g. water allocations, and new irrigation schemes.
Although economic efficiency is an important factor, there are additional economic issues that decision-makers need to consider. Two of these issues are the distribution of costs and benefits across society and their distribution across generations. In terms of the former, neither the equity implications of an allocation nor the equity of the prevailing distribution of wealth are considered in analysis of economic efficiency (van Kooten and Bulte, 2000). Focusing first on the equity implications of an allocation, costs and benefits are usually specified using values that are representative of the whole of society (based, for example, on a random sample). However, the costs and benefits may not be borne equally by society; they may be concentrated in specific geographical areas. These differences may also correlate with differences in income borne by sections of society: environmental costs (e.g. costs imposed by polluted water supplies) are often borne disproportionately by low-income sections of society (NMI and NOAA, 2001). Such disparities can be incorporated into analysis through studies of costs and benefits for separate sections of society (NMI and NOAA, 2001), though this adds to the information requirements and the demands of the analysis.