Use the following to answer questions :
Figure1-3
-In Figure 1-3, what is the opportunity cost of producing 1 unit of x in terms of y?
A)2/3 units of y.
B)1 units of y.
C)3/2 units of y.
D)Cannot be determined from the given information.
E)None of the above.

Question

Use the following to answer questions :
Figure1-3 
-In Figure 1-3, what is the opportunity cost of producing 1 unit of x in terms of y?
A)2/3 units of y. 
B)1 units of y. 
C)3/2 units of y. 
D)Cannot be determined from the given information. 
E)None of the above.

Quizplus · Accepted Answer

The opportunity cost of producing 1 unit of x in terms of y can be found by calculating the slope of the production possibility frontier (PPF). The slope of PPF is the ratio of the amount of y that must be given up to produce an additional unit of x. In this case, the slope of PPF is -2/3, which means that to produce an additional unit of x, 2/3 units of y must be given up. Therefore, the opportunity cost of producing 1 unit of x in terms of y is 2/3 units of y. The best choice(s) are those that recognize this concept and choose option C as the correct answer.

Use the Following to Answer Questions