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Question:
Suppose the economy initially produces 15,000 gallons of drinking water and 350 million barrels of oil, which is represented by point A. The opportunity cost of producing an additional 5,000 gallons of drinking water (that is, moving production to point B) is:
At point B, the economy produces 336 million barrels of oil and 20,000 pounds of food.
Answer:
The opportunity cost of producing 5000 additional pounds of food is 14 million barrels of oil.
Explanation:
At point A:
It is given that the economy produces 350 million barrels of oil and 15000 pounds of food.
At point B:
It is given that the economy produces 336 million barrels of oil and 20000 pounds of food.
Opportunity cost:
The opportunity cost is the value of something that you must let go in order to gain something.
The opportunity cost of producing an additional 5000 pounds of food will be 350 - 336 = 14 million barrels of oil. Therefore, opportunity cost of producing 5000 additional pounds of food is 14 million barrels of oil.