Question

Alternate Outputs from One Day's Labor Input:

USA: 12 bushels of wheat or 3 yards of textiles.
India: 3 bushels of wheat or 12 yards of textiles.

The opportunity cost of one bushel of wheat in India is ____

Answer 1

4 yards of Textiles

Step-by-step explanation:

Opportunity cost is the revenue forgone, for earning the current revenue, it is basically not any kind of monetary cost but it is the cost in terms of loss of revenue in choosing the current revenue generating transaction.

Here when we are calculating the opportunity cost for wheat = 1 bushel in India we will compare it with opportunity foregone in India only, and not of USA.

Therefore opportunity cost of 1 bushel in India =
`(12\: yards \: of \: textiles)/(3\: bushels\: of\:wheat)` = 4 yards of textiles for 1 bushel of wheat.

Opportunity cost of a unit bushel wheat in India is 4 yards textiles.