Question

People:

Select one:
1. consider only direct costs while deciding which activities to specialize in.

2. do not behave in their own self-interest.

3. tend to specialize in those activities in which their opportunity costs are minimum

4. tend to specialize in those activities in which their opportunity costs are maximum.

5. never consider opportunity costs while deciding which activities to specialize in.

Answer 1

People always tend to act in their own self interest and consider opportunity cost while specializing in an activity. If the opportunity cost of producing one good is Lower than the opportunity cost of producing the same good of another person, then the person with lower opportunity cost is said to have comparative advantage in the production of the good. A person specialize in production of a good if he/she has comparative advantage in it. Therefore, considering opportunity cost is crucial to make specialization decision.

Answer- option 3