Reference: Ref 2-19 (Table: Coffee and Salmon Production Possibilities) Look at

Question

Reference: Ref 2-19

(Table: Coffee and Salmon Production Possibilities) Look at the table Coffee and Salmon Production Possibilities. The table shows the maximum amounts of coffee and salmon that countries A and B can produce if they just produce one good. The opportunity cost of producing 1 unit of salmon for B is:

a. 1 coffe

b. 2 coffees

c. 1/2 coffee

d. 1/4 coffee

Reference: Ref 2-19

(Table: Coffee and Salmon Production Possibilities) Look at the table Coffee and Salmon Production Possibilities. The table shows the maximum amounts of coffee and salmon that countries A and B can produce if they just produce one good. The opportunity cost of producing 1 unit of salmon for B is:

a. 1 coffe

b. 2 coffees

c. 1/2 coffee

d. 1/4 coffee

Explanation / Answer

Opportunity cost of commodity is the amount of other good which has been given up (next best alternative sacrificed) in order to produce that commodity. In other words, opportunity cost of a given activity is defined as the value of next best activity.

Opportunity cost for B = Units of one good (coffee) sacrificed / More unit of other good (salmon) produced

= 10 / 10

   = 1 unit of coffee

Conclusion:- The opportunity cost of producing 1 unit of salmon for B is 1 coffee. [Option A]

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