Point A on a linear production possibilities curve represents a 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

The opportunity cost of a cup of coffee is the amount of cappuccinos given up to produce one more coffee. Moving from point B to point A, 9 coffees are gained (12-3) and 3 cappuccinos are lost (6-3), so the opportunity cost of one coffee is 3/9 = 1/3 of a cappuccino.

Point a on a Linear Production Possibilities Curve Represents a Combination