Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. For this consumer, the opportunity cost of buying one more apple is
A)0.5 of a banana.
B)0.8 of a banana.
C)1 banana.
D)2 bananas.

Question

Quizplus · Accepted Answer

The opportunity cost of buying one more apple, priced at $1.50, in terms of bananas, priced at $0.75, is calculated by dividing the cost of an apple by the cost of a banana ($1.50 / $0.75 = 2). Therefore, the opportunity cost of one more apple is 2 bananas.

Assume That a Consumer Has a Given Budget or Income