Demonstrating opportunity cost is done through production:

A. analysis

B. possibility

C. calculation

D. research

Answer

Opportunity cost is best demonstrated through production possibility analysis, where the trade-offs and sacrifices in production are visually represented. Calculations and research can be helpful in specific scenarios, but production possibility analysis provides a clear visualisation of opportunity costs.

Explanation

Opportunity cost refers to the value of the next best alternative that is forgone when a decision is made. It is best demonstrated through production possibility analysis. Production possibility analysis is a graphical representation of the different combinations of goods and services an economy can produce given its limited resources.

By analysing the production possibilities, we can identify the opportunity cost associated with each decision. For example, if an economy has the choice to produce either guns or butter, producing more guns means sacrificing the production of butter, and vice versa.

Calculations and research can be useful in determining specific opportunity costs in certain scenarios, but production possibility analysis provides a visual representation that clearly highlights the trade-offs and opportunity costs involved.