The money cost of a particular good will approximate its opportunity cost if
A)there are serious distortions in the market.
B)the market functions well.
C)there is much specialization in the market.
D)nations are exploiting the law of comparative advantage.

Question

Quizplus · Accepted Answer

The opportunity cost of a good is the value of the next best alternative foregone. In a well-functioning market, prices reflect the value that consumers place on a good or service, which is influenced by its opportunity cost. Therefore, the money cost of a particular good will be a good approximation of its opportunity cost in a well-functioning market. A and D are incorrect because distortions in the market and the law of comparative advantage can affect prices and lead to deviations from the true opportunity cost. C is also incorrect because specialization in the market may not necessarily guarantee that prices accurately reflect opportunity cost.

The Money Cost of a Particular Good Will Approximate Its