Assume that a consumer has a given budget or income of $10 and that she can buy only two goods, apples or bananas. The price of an apple is $1.00 and the price of a banana is $0.50. For this consumer, the opportunity cost of buying one more apple is
A)0.5 of a banana.
B)0.1 of a banana.
C)1 banana.
D)2 bananas.

Question

Quizplus · Accepted Answer

The opportunity cost of buying one more apple, priced at $1.00, instead of bananas, priced at $0.50 each, is the amount of bananas that could have been bought with that $1.00. Since each banana costs $0.50, $1.00 can buy 2 bananas. Therefore, the opportunity cost of one more apple is 2 bananas.

Assume That a Consumer Has a Given Budget or Income