Question

On a production possibilities frontier, 500 pounds of apples and 1,200 pounds of bananas can be produced while at another point on the same frontier, 300 pounds of apples and 1,300 pounds of bananas can be produced. Between these points, what is the opportunity cost of producing one pound of apples?

A. 2 pounds of bananas
B. 100 pounds of bananas
C. 2 pounds of apples
D. 0.5 of a pound of bananas

Answer 1

The correct answer is D. 0.5 of a pound of bananas

Explanation:

The cost of opportunity is the best alternative that you sacrifice when you choose an option.

It represent the benefits that you misses out on when choosing one alternative over another.

To calculate the opportunity cost we see how many bananas we sacrifice to produce 1 apple.

We can say that increment in banana / increment in apples

OC=Δ x/Δ y

OC=(1300-1200)/(300-500)

OC=100/-200

OC= -0,5

That mean that the opportunity cost of produce 1 pound of apples is 1/2 pounds of bananas.