Betty and Ann live on a desert island. With a day's labour, Ann can produce 6 fish or 4 coconuts; Betty can produce 3 fish or 1 coconut. Betty's opportunity cost of producing 1 fish is _______, and she should specialise in the production of _______.
A) 4 coconuts per fish; fish
B) 1 coconut per fish; fish
C) 1/3 coconut per fish; fish
D) 2/3 coconut per fish; coconuts

Question

Quizplus · Accepted Answer

Betty's opportunity cost of producing 1 fish is the amount of coconuts she has to give up to produce that fish. Since she can produce 3 fish or 1 coconut, producing 1 fish means giving up 1/3 of a coconut (1 coconut / 3 fish = 1/3 coconut per fish). Therefore, her opportunity cost of producing 1 fish is 1/3 coconut. Given that Ann can produce fish and coconuts at a higher rate, Betty should specialise in the production of fish, which she is relatively less inefficient at producing compared to Ann.

Betty and Ann Live on a Desert Island