The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy. Refer to the above table.What is the opportunity cost of producing the fourth unit of capital goods?
A)6 units of consumer goods
B)7 units of consumer goods
C)15 units of consumer goods
D)22 units of consumer goods

Question

The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy.  Refer to the above table.What is the opportunity cost of producing the fourth unit of capital goods?
A)6 units of consumer goods 
B)7 units of consumer goods 
C)15 units of consumer goods 
D)22 units of consumer goods

Quizplus · Accepted Answer

To produce the fourth unit of capital goods, the economy must give up producing 7 units of consumer goods. This is the opportunity cost of producing one extra unit of capital goods. Choice B is the best choice as it correctly identifies the opportunity cost.

The Production Possibilities Curve Below Shows the Hypothetical Relationship Between