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 pie?
A)125 pies
B)0.4 cakes
C)2.5 pies
D)0.4 pies
E)50 cakes

Question

Quizplus · Accepted Answer

The opportunity cost of producing one pie is the amount of cakes that could have been produced instead. Since the shop can produce 125 pies or 50 cakes in a day, producing one pie means not producing 50/125 = 0.4 cakes.

Suppose a Bakeshop with 5 Employees Can Produce Both Pies