Pregunta
How are money cost and opportunity cost related to each other?
a. If markets function well, they are closely related.
b. Money cost is greater than or equal to opportunity cost.
c. In a market economy, they must be equal to each other.
d. They are always identical in any economic system.
e. Opportunity cost must always exceed money cost.
a. If markets function well, they are closely related.
b. Money cost is greater than or equal to opportunity cost.
c. In a market economy, they must be equal to each other.
d. They are always identical in any economic system.
e. Opportunity cost must always exceed money cost.
Ask by Reyes Wang. in the United States
Mar 21,2025
Solución de inteligencia artificial de Upstudy
Respuesta verificada por el tutor
Responder
Money cost and opportunity cost are closely related in well-functioning markets because the money spent reflects the value of the next best alternative forgone.
Solución
To understand the relationship between money cost and opportunity cost, let’s analyze the options provided:
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Money Cost: This refers to the actual monetary expenditure incurred when making a purchase or investment.
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Opportunity Cost: This is the value of the next best alternative that is forgone when a choice is made. It represents the benefits that could have been gained from that alternative.
Now, let’s evaluate each option:
a. If markets function well, they are closely related.
- This is true because in a well-functioning market, the money cost reflects the opportunity cost of resources used.
b. Money cost is greater than or equal to opportunity cost.
- This is not necessarily true. Opportunity cost can be greater than the money cost if the next best alternative has a higher value than the money spent.
c. In a market economy, they must be equal to each other.
- This is not accurate. While they can be related, they do not have to be equal. Opportunity cost can vary based on individual preferences and alternatives.
d. They are always identical in any economic system.
- This is false. Money cost and opportunity cost can differ based on the choices made and the alternatives available.
e. Opportunity cost must always exceed money cost.
- This is also not true. Opportunity cost can be less than, equal to, or greater than the money cost depending on the situation.
Based on this analysis, the best answer is:
a. If markets function well, they are closely related.
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Simplifique esta solución Mind Expander
If markets function well, money cost and opportunity cost are closely related since they both reflect the trade-offs involved in economic decisions. Money cost represents the actual monetary expenditure, while opportunity cost factors in the value of the next best alternative that is forgone. Understanding this relationship helps individuals and businesses make more informed choices that align with their economic goals.
In practical terms, if you’re spending money on one option, you’re sacrificing the benefits you could have received from another. For example, if you spend $10 on a movie ticket, your opportunity cost includes not only the $10 but also what you could have done with that money, like purchasing a book or saving it for future use. Recognizing these trade-offs can enhance decision-making and prioritize valuable opportunities!
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