Suppose nation A produces only two goods, apples and oranges . If nation A produces only apples, it can make 16 apples per day. If nation A produces only oranges, it can make 4 oranges per day. If the country has a constant production trade- off between apples and oranges, then the opportunity cost of one apple in nation A is:

Question

Quizplus · Accepted Answer

The opportunity cost of one apple is the amount of oranges that must be given up to produce one more apple. Since 16 apples are equivalent to 4 oranges, the opportunity cost of one apple is 4/16 = 0.25 oranges.

Suppose Nation a Produces Only Two Goods, Apples and Oranges