Suppose Joe can prepare 10 sandwiches or 5 pizzas in an hour and Beth can produce 12 sandwiches or 9 pizzas. Which of the following is TRUE?
A) Beth should produce pizza because she has a higher opportunity cost of producing pizza than does Joe.
B) Beth should produce pizza because she has a lower opportunity cost of producing pizza than does Joe.
C) Joe should produce pizza because he has a higher opportunity cost of producing pizza than does Beth.
D) Joe should produce pizza because he has a lower opportunity cost of producing pizza than does Beth.

Question

Quizplus · Accepted Answer

Beth has a lower opportunity cost of producing pizza because she sacrifices fewer sandwiches to produce one pizza compared to Joe. For Beth, the opportunity cost of 1 pizza is 12/9 = 1.33 sandwiches, whereas for Joe, it's 10/5 = 2 sandwiches.

Suppose Joe Can Prepare 10 Sandwiches or 5 Pizzas in an Hour