A country produces only apples and bananas. Moving from point A to point B along its production possibilities frontier, 5 apples are forgone and 4 bananas are gained. What is the opportunity cost of a banana?
A) 1 banana
B) 4 apples
C) 4/5 of an apple
D) 5/4 of an apple
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The opportunity cost of a banana is the amount of apples forgone to produce an extra banana. Here, 5 apples are forgone to gain 4 bananas, so the opportunity cost of one banana is 5 apples/4 bananas = 5/4 of an apple.

A Country Produces Only Apples and Bananas