The diagram below shows Robinson Crusoe's annual production possibilities boundary for the production of bananas and coconuts. FIGURE 32-3 Refer to Figure 32-3.What is Robinson Crusoe's opportunity cost of bananas in terms of coconuts?

Question

The diagram below shows Robinson Crusoe's annual production possibilities boundary for the production of bananas and coconuts.  FIGURE 32-3 Refer to Figure 32-3.What is Robinson Crusoe's opportunity cost of bananas in terms of coconuts?

Quizplus · Accepted Answer

The opportunity cost of bananas in terms of coconuts is the slope of the production possibilities boundary, which is 2 bananas for every 1 coconut (the distance between point A and B on the horizontal axis is 10 bananas, and the distance between point A and B on the vertical axis is 5 coconuts, so the slope is 10/5 = 2). Therefore, Robinson Crusoe's opportunity cost of bananas in terms of coconuts is 1/2 coconut. To maximize his production, Robinson Crusoe should produce at point B, which gives him 5 coconuts and 10 bananas, the combination with the highest attainable output.

The Diagram Below Shows Robinson Crusoe's Annual Production Possibilities Boundary