Suppose that a country is producing on its PPC at a point to the left of the tan

Question

Suppose that a country is producing on its PPC at a point to the left of the tangency between the trade line and the PPC. At the production point,

A.the opportunity cost in production of the good on the vertical axis is less than its trade price.

B.the opportunity cost in production of the good on the horizontal axis is more than its trade price.

C.the opportunity cost in production of the good on the vertical axis equals its trade price.

D.the opportunity cost in production of the good on the horizontal axis may be either less than or more than its trade price.

E.the opportunity cost in production of the good on the horizontal axis is less than its trade price.

Explanation / Answer

If a country is producing on its PPC at a point to the left of the tangency between the trade line and the PPC. At the production point, the opportunity cost in production of the good on the vertical axis is less than its trade price.

The formula for opportunity cost is change in good 2(vertical axis)/ change in good 1 (horizontal axis)

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