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In: Economics

Why do opportunity cost constant when a nation produces more of one good in relative to...

Why do opportunity cost constant when a nation produces more of one good in relative to another?                                                                                                                                (2   

Solutions

Expert Solution

opportunity cost represent the potential benefits of an individual, investor or business misses out when choosing one alternative over another.it is the forgone benefit that would have been derived by an option not chosen.In order to understand the opportunity cost of one product, all available options/alternatives must be considered and weighed against the other.It help to take profitable decisions to the organizations.For example if a player attends baseball training to be a better player instead of taking a vacation.The opportunity cost here is the vacation.

when an opportunity cost remain constant, it means the MRT(Marginal Rate of Transformation) is constant. MRT is the number of units or amount of a good that must be forgone to create or attain one unit of another good.It allows economists to analyze the opportunity cost to produce one extra unit of something.According to the question the opportunity cost remain constant when a nation produces more of one good in relative to another.This case reflects a situation were resources are not specialized and can be substituted for each other with no added cost.Here the resources are equally suited for the production of two goods.A nation only experience constant opportunity cost when it's inputs of the production of goods are substitutte to each other.


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