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Answer the question on the basis of the data given in the following production possibilities table....

Answer the question on the basis of the data given in the following production possibilities table. Production Possibilities (Alternatives) A B C D E F Capital Goods 5 4 3 2 1 0 Consumer Goods 0 5 9 12 14 15 Refer to the table. If the economy is producing at production alternative B, the opportunity cost of the 10th unit of consumer goods will be

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Answer #1

The 10th unit of the consumer good would lie in between point C and D. The point C has an output of 3 units of capital and 9 unit of consumer good. Thus in order to produce 10th unit it has to sacrifice (1/3) unit of capital.

Currently the firm uses the production combination of B where it produces 4 units of capital good and 5 unit of consumer good. Now we have to produce additional 5 units of consumer good then the capital good is 4/3.

Opportunity cost of additional 5 units = 4/3 unit of capital gpod

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