Using the information below, what is the opportunity cost of producing Hot Fudge

Question

Using the information below, what is the opportunity cost of producing Hot Fudge Sundaes for Amber? For Davis?

Production Possibilities Frontier in a 4 hour work shift
                              Hot Fudge Sundaes              Chocolate Milkshakes
Amber                                  35                                           26
Davis                                     52                                           26

2)

3)

4)

Amber: losing 7/5 milkshakes     Davis: losing 2 milkshakes

2)

Amber: gaining 7/5 milkshakes   Davis: gaining 2 milkshakes

3)

Amber: losing 5/7 milkshake     Davis: losing 1/2 milkshake

4)

Amber: gaining 5/7 milkshake    Davis: gaining 1/2 milkshake

Explanation / Answer

In a 4-hours shift, Amber can produce either 35 Hot Fudge Sundaes or 25 Chocolate milkshakes.

So,

The opportunity cost of producing Hot Fudge Sundaes is (25/35) 5/7 milkshakes.

This means that Amber has to sacrifice the production of 5/7 milkshakes to produce 1 Hot Fudge Sundaes.

In a 4-hours shift, Davis can produce either 52 Hot Fudge Sundaes or 26 Chocolate milkshakes.

So,

The opportunity cost of producing Hot Fudge Sundaes is (26/52) 1/2 milkshakes.

This means that Davis has to sacrifice the production of 1/2 milkshakes to produce 1 Hot Fudge Sundaes.

Hence, the correct answer is the option (3).

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