The accompanying figure shows the production possibilities curve for the island of Genovia: The opportunity cost of producing a car in Genovia is:
A)5,000 tons of agricultural products.
B)500 tons of agricultural products.
C)5 tons of agricultural products.
D)50 tons of agricultural products.

Question

The accompanying figure shows the production possibilities curve for the island of Genovia:  The opportunity cost of producing a car in Genovia is:
A)5,000 tons of agricultural products. 
B)500 tons of agricultural products. 
C)5 tons of agricultural products. 
D)50 tons of agricultural products.

Quizplus · Accepted Answer

To get an additional 1,000 cars, this country would have to give up 50,000 tons of agricultural products. Thus, the opportunity cost of one car is 50,000/1,000 = 50. More generally, the opportunity cost of producing one more unit of the good on the y-axis equals 1 over the absolute value of the slope of the PPC.

The Accompanying Figure Shows the Production Possibilities Curve for the Island