Figure 3-11
The graph below represents the various combinations of ham and cheese (in pounds) that the nation of Bonovia could produce in a given month.

-Refer to Figure 3-11.For Bonovia,what is the opportunity cost of a pound of cheese?
A) 0.8 pounds of ham
B) 1.25 pounds of ham
C) 8 pounds of ham
D) 16 pounds of ham

Question

Figure 3-11
The graph below represents the various combinations of ham and cheese (in pounds) that the nation of Bonovia could produce in a given month.
 
-Refer to Figure 3-11.For Bonovia,what is the opportunity cost of a pound of cheese?
A) 0.8 pounds of ham 
B) 1.25 pounds of ham 
C) 8 pounds of ham 
D) 16 pounds of ham

Quizplus · Accepted Answer

The opportunity cost of a pound of cheese is the amount of ham that is given up to produce an additional pound of cheese. Looking at the graph, if Bonovia moves from producing 3 pounds of cheese to 4 pounds of cheese, they must give up producing 5 pounds of ham (moving from point A to point B). Therefore, the opportunity cost of 1 pound of cheese is 5/4 = 1.25 pounds of ham.

The best choice depends on the specific circumstances and preferences of Bonovia. However, if they want to produce the most cheese possible, they should produce at point C, which is the point where the production possibility frontier (PPF) touches the cheese axis. If they want to produce the most ham possible, they should produce at point D, where the PPF touches the ham axis. If they want to produce a combination of both, they should choose a point along the PPF, such as point B, which gives a balance between the production of both goods.

Figure 3-11 the Graph Below Represents the Various Combinations of Ham and Ham