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

Question

Quizplus · Accepted Answer

The opportunity cost of an apple is the amount of bananas forgone to produce an extra apple. Here, 5 apples are gained at the expense of 4 bananas, so the opportunity cost of 1 apple is 4 bananas divided by 5 apples, which equals 4/5 of a banana.

A Country Produces Only Apples and Bananas