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What is the opportunity cost of moving from an inefficient production plan to an efficient production...

What is the opportunity cost of moving from an inefficient production plan to an efficient production plan where the production of both goods increase?

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Answer #1

The interior points of Production Possibility Curve represent the inefficient combination if production. Inefficiency is represented by underemployment of economic resources like land , labor, capital and entrepreneurship.
The Production Possibility Curve is a model that captures opportunity costs of choices as the points on the curve are efficient and points beyond are not achievable. The opportunity cost is defined as moving from one efficient combination of production and in the process how much compromise had to be done to produce move of one item as compared to the other.
Opportunity cost of each unit of product P in terms of units of product Q given up is –
Opportunity Cost of each unit of product P = (Q2 -Q1)/(P2 -P1) units of product Q

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