Suppose a bakeshop with 5 employees can produce both pies and cakes.In one day,if all resources are devoted to baking pies,the shop can produce 125 pies; if all resources are devoted to baking cakes,the shop can produce 50.What is the shop's opportunity cost of producing any one cake?
A)0.4 pies
B)0.25 pies
C)2.5 pies
D)0.4 cakes
E)2.5 cakes

Question

Quizplus · Accepted Answer

The opportunity cost of producing one cake is the amount of pies that could have been produced instead. If the shop can produce 125 pies or 50 cakes in a day, then producing one cake means giving up 125/50 = 2.5 pies.

Suppose a Bakeshop with 5 Employees Can Produce Both Pies