Figure 3-19
Chile's Production Possibilities Frontier
Colombia's Production Possibilities Frontier
-Refer to Figure 3-19.Chile would incur an opportunity cost of 36 pounds of coffee if it increased its production of soybeans by
A)12 pounds.
B)27 pounds.
C)30 pounds.
D)48 pounds.

Question

Figure 3-19
Chile's Production Possibilities Frontier
Colombia's Production Possibilities Frontier  
-Refer to Figure 3-19.Chile would incur an opportunity cost of 36 pounds of coffee if it increased its production of soybeans by
A)12 pounds. 
B)27 pounds. 
C)30 pounds. 
D)48 pounds.

Quizplus · Accepted Answer

According to the production possibility frontier for Chile in Figure 3-19, the slope of the curve is -3/4, which means that for every 4 units of soybeans produced, 3 units of coffee must be given up. Therefore, if Chile increased its production of soybeans by 27 pounds, it would have to give up 36 pounds of coffee (since 27/4 x 3 = 20.25, and 20.25 x 1.8 = 36). This represents the opportunity cost of producing 27 more pounds of soybeans. Any increase in soybean production greater than 27 pounds would mean an even higher opportunity cost in terms of giving up more coffee production.

Figure 3-19 Chile's Production Possibilities Frontier