Question

Using the PPC table below, calculate the opportunity cost of producing one more of one good in terms of the other (as asked below), between each point (between A & B; B & C; etc.).
Don't Include the negative sign or the words Capital/Consumer

Combination	Consumer	Capital
A	0	735
B	180	720
C	360	673
D	540	588
E	720	441
F	900	0

1. What is the opportunity cost of one consumer good from A to B   

2: What is the opportunity cost of one consumer good from B to C    
3: What is the opportunity cost of one consumer good from C to D    
4: What is the opportunity cost of one capital good from F to E    
5: What is the opportunity cost of one capital good from E to D    

Answer 1

The opportunity costs can be defined as the lost units of output of other goods for producing an additional unit of output of a good.

1.

While moving from point A to B, the opportunity cost of one consumer good is=(735-720)/(180-0)

=15/180

=0.083 capital good.

2.

While moving from point B to C, the opportunity cost of one consumer good is=(720-673)/(360-180)

=47/180

=0.261 capital good.

3.

While moving from point C to D, the opportunity cost of one consumer good is=(673-588-)/(540-360)

=85/180

=0.472 capital good

4.

While moving from point F to E, the opportunity cost of one capital good is=(900-720)/(441-0)

=180/441

=0.408 consumer good

5.

While moving from point E to D, the opportunity cost of one capital good is

=(720-540)/(588-441)

=180/147

=1.22 consumer goods.