Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S.capacity,ceteris paribus.Complete the table by calculating the required opportunity costs for both the B-1 and Stealth bombers.
- On the basis of your calculations in Table 1.1,you may infer that the law of increasing opportunity costs applies to
A)Stealth bombers but not to B-1 bombers.
B)B-1 bombers but not to Stealth bombers.
C)Both B-1 bombers and Stealth bombers.
D)Neither B-1 bombers nor Stealth bombers.

Question

Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S.capacity,ceteris paribus.Complete the table by calculating the required opportunity costs for both the B-1 and Stealth bombers. 
- On the basis of your calculations in Table 1.1,you may infer that the law of increasing opportunity costs applies to
A)Stealth bombers but not to B-1 bombers. 
B)B-1 bombers but not to Stealth bombers. 
C)Both B-1 bombers and Stealth bombers. 
D)Neither B-1 bombers nor Stealth bombers.

Quizplus · Accepted Answer

The law of increasing opportunity cost applies to both B-1 and Stealth bombers, as shown by the increasing opportunity cost of producing additional units of each aircraft. Therefore, the best choice would be to produce at the point where the opportunity cost of producing one more unit of each aircraft is equal, which is where the marginal cost of producing one more Stealth bomber equals the marginal cost of producing one more B-1 bomber, in this case, at the fourth unit of each aircraft.

Table 11 Shows the Hypothetical Trade-Off Between Different Combinations of Stealth