Question

If opportunity cost were to suddenly increase, total cost would a) decrease and net benefit would increase. b) decrease and net benefit would decrease. c) increase and net benefit would increase. d) increase and net benefit would decrease.

Answer 1

Answer:

The correct answer is option d.

Explanation:

The total economic costs include both explicit as well as implicit costs. The explicit costs are the direct costs incurred and the implicit costs are opportunity costs.

An increase in the opportunity cost will cause the total economic costs to increase. The net benefit is the difference between the total revenue earned and the total cost incurred. An increase in the opportunity cost will cause a net benefit to decrease as total costs will increase.