Question

The Grind can produce either coffee or tea. Coffee takes one minute to make, and tea...

The Grind can produce either coffee or tea. Coffee takes one minute to make, and tea takes three minutes. What is the opportunity cost of making one cup of tea?

a. 3 cups of coffee

b. 1 cup of coffee

c. 1 cup of tea

d. Not enough information
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Answer #1

3 cups of coffee

Opportunity cost refers to loss of output when resources are shifted from Use 1 to Use 2.

Grind here is a resource and use of resource is shifted from making coffee to make tea.

In 3 minutes grind can produce or make one cup of tea.

In 1 minute grind can make 1 cup of coffee which means in 3 minutes grind can make 3 cups of coffee.

So when grind is used to make one cup of tea then there will be loss of 3 cups of coffee because in 3 minutes grind makes one cup of tea and in 3 minutes grind can make 3 cups of coffee too. The total loss for making 1 cup of tea is 3 cups of coffee. Therefore the opportunity cost of making 1 cup of tea is 3 cups of coffee.

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