Assume point A on a linear production possibilities curve represents the combination of 12 coffees and 3 cappuccinos, and point B represents 3 coffees and 6 cappuccinos. Suppose coffees are on the vertical axis and cappuccinos are on the horizontal axis. The opportunity cost of a cup of coffee is:
A)3 cappuccinos.
B)9 cappuccinos.
C)1/3 of a cappuccino.
D)6 cappuccinos.

Question

Quizplus · Accepted Answer

Moving from point B to point A, involves giving up 3 cappuccinos to get 9 cups of coffee, so the opportunity cost of 1 cup of coffee is 1/3 (= 3/9)of a cappuccino.

Assume Point a on a Linear Production Possibilities Curve Represents