Opportunity Cost and Production Possibilities

The video tutorial introduces Hablar's theory of opportunity cost, explaining the concept as the loss of other alternatives when one is chosen. It covers three types of opportunity costs: constant, increasing, and decreasing, with examples and diagrams to illustrate each. The tutorial also discusses the implications of these costs in international trade, using hypothetical scenarios involving two countries and two commodities. The video concludes with a summary of the theory and its application in real-world trade.

What is the definition of opportunity cost?

• The cost of producing a good

• The gain of choosing an alternative

• The loss of other alternatives when one is chosen

• The profit from selling a product

In the example given, what is the opportunity cost of producing mobiles?

• The time spent on production

• The sacrifice of producing tablets

• The profit from selling tablets

• The resources used to produce mobiles

What characterizes constant opportunity cost?

• The opportunity cost remains the same for each additional unit

• The opportunity cost increases with each unit produced

• The opportunity cost decreases with each unit produced

• The opportunity cost is unpredictable

Why is constant opportunity cost not realistic in real life?

• Resources are unlimited

• Production techniques are always improving

• Resources are not perfectly adaptable for all uses

• Demand for products is always changing

What happens to opportunity cost as production increases under increasing opportunity cost?

• It becomes zero

• It increases

• It decreases

• It remains constant

What shape does the production possibility curve take under increasing opportunity cost?

• Concave to the origin

• Convex to the origin

• Linear

• Circular

In the trade example, what does country A do after trade?

• Increases production of Y and exports Y

• Increases production of X and exports X

• Increases production of X and exports Y

• Increases production of Y and exports X

What is the opportunity cost trend under decreasing opportunity cost?

• It increases

• It decreases

• It remains constant

• It fluctuates

What shape does the production possibility curve take under decreasing opportunity cost?

• Linear

• Circular

• Convex to the origin

• Concave to the origin

After trade, what does country B specialize in under decreasing opportunity cost?

• No specialization

• Production of both X and Y

• Production of Y

• Production of X