Question

What is opportunity cost? Discuss incentives from your perspective as a policymaker. Why is productivity important?

Answer 1

Opportunity cost refers to the loss of potential benefits from choosing best option from a number of available alternate options. From a perspective of the policymaker a constant opportunity cost would be involved in economic decisions making. For nations, the comparative advantage occurs arises if there is a difference in the opportunity costs. When a nation has a comparative advantage over the another nation, it indicates that both nations will benefit from trading because each nation will receive a good at a price that would be lower than its own opportunity cost of production for that item

Moreover the Scarcity = lack of resources = requirement for resource allocation, thus an efficient allocation of resource in production of goods in terms of type, quality, and quantity of what they produce will lead to better growth of the economy