Assume a society can produce either olives or grapes. If the marginal rate of transformation of bushels of olives into bushels of grapes is 0.2, then the opportunity cost of grapes is
A) the 5 bushels of olives that must be forgone.
B) the 5 bushels of grapes that must be forgone.
C) the 0.2 bushels of olives that must be forgone.
D) the additional 0.2 gallons of olives that can be produced.

Question

Quizplus · Accepted Answer

The opportunity cost of grapes is the amount of olives that must be forgone to produce one more bushel of grapes. In this case, the marginal rate of transformation is 0.2, which means that 0.2 bushels of olives must be forgone to produce one more bushel of grapes.

Assume a Society Can Produce Either Olives or Grapes