In the context of opportunity cost, how does the concept help explain why countries must make choices about resource allocation?

• A. Opportunity cost suggests that resources are unlimited, so countries do not need to make choices.
• B. Opportunity cost only applies to individuals, not to countries or governments.
• C. Opportunity cost is irrelevant to economics because all choices have the same value.
• D. Opportunity cost shows that using resources for one purpose means forgoing their use for another, highlighting the need for choices.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the concept of opportunity cost, which is the value of the next best alternative foregone when a choice is made.
2. Step 2: Recognize that resources (such as labor, capital, and land) are scarce, meaning they cannot be used for all possible purposes simultaneously.
3. Step 3: Apply the concept of opportunity cost to countries, which must decide how to allocate their limited resources among competing uses (e.g., healthcare, education, defense).
4. Step 4: Realize that because using resources for one purpose means giving up the opportunity to use them for another, countries face trade-offs and must make choices.
5. Step 5: Conclude that opportunity cost highlights the necessity of making decisions about resource allocation, as it shows the cost of forgoing alternatives.