Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. For this consumer, the opportunity cost of buying one more apple is
A) 0.5 of a banana.
B) 0.8 of a banana.
C) 1 banana.
D) 2 bananas.

Question

Quizplus · Accepted Answer

The opportunity cost of buying one more apple is the number of bananas that could be bought instead. Since an apple costs $1.50 and a banana costs $0.75, the opportunity cost of one apple is $1.50/$0.75 = 2 bananas.

Assume That a Consumer Has a Given Budget or Income