Question

Assume a society can produce either olives or grapes. If the marginal rate of transformation of bushels of olives into bushels of grapes is 0.2, then the opportunity cost of grapes is

Answer 1

You've asked an incomplete question. Here's the options that completes it;

A) the 5 bushels of grapes that must be forgone.

B) the additional 0.2 gallons of olives that can be produced.

C) the 5 bushels of olives that must be forgone.

D) the 0.2 bushels of olives that must be forgone.

Answer:

D. The 0.2 bushels of olives that must be forgone.

Step-by-step explanation:

Remember opportunity cost is the value of what is lost when another alternative is chosen.

Note also the question says the society can produce EITHER olives or grapes, therefore the 0.2 bushels olives transformed is the alternative forgone.

Another example is when you have $3 to buy a pen. Your best colours are blue and black but you buy black because your money can either buy a blue or black pen but not both. Therefore the alternative forgone is the blue pen.