When a firm is making a profit-maximizing production decision, which of the following principles of economics is likely to be most important to the firm's decision?
A)The cost of something is what you give up to get it.
B)A country's standard of living depends on its ability to produce goods and services.
C)Prices rise when the government prints too much money.
D)Governments can sometimes improve market outcomes.

Question

Quizplus · Accepted Answer

The principle of opportunity cost, which states that the cost of something is what you give up to get it, is critical to a firm's profit-maximizing production decision. In order to determine the optimal level of output, the firm must consider the costs of producing additional units, including the opportunity cost of using resources that could be used in other ways. By taking into account the opportunity cost of production, the firm can make a decision that maximizes profits.

When a Firm Is Making a Profit-Maximizing Production Decision, Which