Question

Alpha can produce 40 units of coffee or 8 units of cashew nuts. Beta can produce 6 units of coffee or 6 units of nuts. Which statement is accurate with regard to the opportunity cost of production? 1. Beta's opportunity cost of producing 1 unit of nuts is 8 units of coffee.2. Alpha's opportunity cost of producing 1 unit of cashew nuts is 5 units of coffee.3. Alpha's opportunity cost of producing 1 unit of coffee is 8 units of nuts.

Answer 1

The statement that is accurate with regard to the opportunity cost of production is that Alpha's opportunity cost of producing 1 unit of coffee is 8 units of nuts.

Explanation:

• The opportunity cost bore by Beta is the least as the production that she is able to do of both the commodities is equal, i.e. 6 units of cashew nuts for 6 units of coffee.
• On the other hand, when Alpha chooses to produce 1 unit of coffee, she loses the opportunity to produce 8 units of cashew nuts, i.e., she pays an opportunity cost of 8 units of cashew nuts in order to produce 1 unit of coffee.