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Question

Difficulty: EasyScarcity and Choice

A baker has a limited quantity of flour that can be used to produce either 20 loaves of bread or 5 cakes. If the baker decides to bake 5 cakes, what is the opportunity cost of this choice?

  1. The 20 loaves of bread foregoneAnswer
  2. B
    The monetary cost of buying the flour
  3. C
    The 5 cakes produced
  4. D
    The financial profit earned from selling the cakes

Answer

The 20 loaves of bread foregone
Opportunity cost is defined as the real cost of a choice expressed in terms of the next best alternative foregone. Since the baker used the available flour to produce 5 cakes instead of 20 loaves of bread, the 20 loaves of bread represent the opportunity cost.

Step-by-Step Solution

1
Identify the choice made and the alternative sacrificed due to limited resources.
The baker chose to produce 5 cakes, which required all available flour, sacrificing the production of 20 loaves of bread.
Because resources are scarce, choosing one option means forfeiting the benefit of the next best alternative.

Key Concept

Opportunity Cost
Estimated Time:45s
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Topics

Scarcity and Choice

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