Question

Residents of the nation of Border Kingdom can forgo production of digital televisions and utilize all available resources to produce 300 bottles of high-quality wine per hour. Alternatively, they can forgo producing wine and instead produce 60 digital TVs per hour. In the neighboring country of Coastal Realm, residents can forgo production of digital TVs and use all resources to produce 150 bottles of high-quality wine per hour, or they can forgo wine production and produce 50 digital TVs per hour. In both nations, the opportunity costs of producing the two goods are constant.

a. What is the opportunity cost of producing digital TVs in Border Kingdom? Or of

producing bottles of wine in Border Kingdom?

b. What is the opportunity cost of producing digital TVs in Coastal Realm? Of producing bottles of wine in Coastal Realm?

Answer 1

Solution

Opportunity cost is defined as the cost of forgoing the next available option for making the present choice.

Ex: Attending the Post graduate job instead of doing a job and earning.So,here I have sacrificed my choice to work and earn for another choice i.e., to attend post-graduate program.

a. To forgo the option to produce 300 bottles of high-quality wine per hour

Opportunity cost of producing bottles of wine in Border Kingdom is 60 Digital TVs per hour.

b. Opportunity cost of producing digital TVs in Coastal Realm is to forgo the production of 150 wine bottles per hour

Opportunity cost of producing bottles of wine in Coastal Realm - is to forgo the production of 50 digital TVs per hour

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