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 amount of coconuts Robinson Crusoe has to give up to produce one more banana. From the graph, we can see that if Robinson Crusoe produces 4 coconuts, he can produce 8 bananas. To produce 9 bananas, he has to give up producing 1 coconut. Therefore, the opportunity cost of bananas in terms of coconuts is 1/2 (1 coconut for every 2 bananas).

The best choice is to produce at point A, where Robinson Crusoe produces 4 coconuts and 8 bananas. This point is on the production possibility curve and thus represents the most efficient use of resources.

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