Which of the following best describes how specialized producers decrease their opportunity costs?

• A. By focusing on producing goods for which they have a comparative advantage
• B. By reducing the amount of labor used in production
• C. By increasing the prices of all goods they produce
• D. By producing a wide variety of goods regardless of efficiency

Answer: (A)

Verified step by step guidance

1. Understand the concept of opportunity cost: it is the value of the next best alternative foregone when making a choice.
2. Recall that specialization means focusing on producing certain goods or services rather than many different ones.
3. Recognize that comparative advantage occurs when a producer can produce a good at a lower opportunity cost than others.
4. Analyze how specializing in goods where a producer has a comparative advantage allows them to minimize opportunity costs by allocating resources efficiently.
5. Conclude that by focusing on goods with comparative advantage, producers decrease their opportunity costs, rather than by reducing labor, raising prices, or producing many goods inefficiently.